In response to the potential strike on the US East Coast, multiple shipping companies have planned substantial price hikes, but Maersk and Hapag-Lloyd have not followed suit, and the industry is pessimistic about this move. Affected by tariff hikes and the risk of strikes, American importers have advanced their purchasing plans, leading to an early end of the peak season. The industry believes that significant price hikes are unrealistic and predicts only minor adjustments or price increases through flight reductions. The impact of strikes on freight rates depends on their duration, with some cargo potentially being rerouted to the US West Coast for import and then transshipped to the East Coast.

Given the potential strike on the US East Coast on October 1, several shipping companies have announced in advance significant freight rate adjustment plans for US routes. Non-alliance shipping companies have claimed an increase of USD 4,000 per TEU, while some Asian alliance shipping companies have planned to raise prices by USD 2,000 on October 1 and have additionally proposed a further USD 2,000 increase on October 15.

However, it is noteworthy that the two giants, Maersk and Hapag-Lloyd, have not proposed any price hike plans so far, and industry executives generally hold a pessimistic view towards this round of substantial price hikes.

The head of a major freight forwarding company pointed out that due to the increase in US tariffs and the risk of strikes at East Coast ports, American importers have accelerated their procurement and inventory replenishment efforts, leading to an early conclusion of the traditional peak season.

Given the current market conditions, leveraging the threat of strikes to significantly raise freight rates faces numerous challenges. Specifically, cargo shipped after October 1 will arrive on the US East Coast near November, by which time any strikes or work slowdowns may have subsided. Additionally, the fourth quarter is traditionally a slow season with significantly reduced freight demand, further undermining the feasibility of price hikes.

Industry insiders analyze that shipping companies may be able to capitalize on the strike by adding USD 300 to 500 per TEU or increasing rates by reducing sailings, but the previously announced substantial price hikes of USD 2,000 to 4,000 per TEU appear unrealistic.

Moreover, with seasonal declines in cargo demand and increased capacity supply in the fourth quarter, freight rates are more likely to decline than rise. Regarding the strike by dockworkers on the US East Coast, given the proximity to the US presidential election, the possibility of government intervention for mediation cannot be overlooked. If the strike persists, while some shipping companies plan to raise prices again on October 15, Maersk and Hapag-Lloyd remain cautious and have not followed suit with price hikes.

To mitigate the potential impact of the strike, some cargo may be rerouted to the US West Coast for import and then transported by rail to the East Coast, which could help support West Coast freight rates. The actual impact of the strike on freight rates will depend on its duration. Executives from European shipping companies revealed that Maersk and Hapag-Lloyd prefer to maintain current freight rate stability and only consider minor increases if the strike actually occurs. In contrast, executives from Asian shipping companies believe that an increase of USD 300 to 500 per TEU is more reasonable, but given market supply and demand dynamics and competition from low-cost non-alliance carriers, the room for price hikes is limited and likely to be short-lived.

According to the latest data from the Shanghai Containerized Freight Index (SCFI) released by the Shanghai Shipping Exchange, freight rates for the US routes peaked on July 5 this year, with the freight rate for the US West Coast route reaching a high of USD 8,103 per TEU. However, by September 13 (last Friday), the freight rate for this route had significantly dropped to USD 5,494, marking a cumulative decrease of USD 2,609 and a decline rate of 32.20%. Similarly, freight rates for the US East Coast route also fell from a high of USD 9,945 to USD 6,838, a reduction of USD 3,107 and a decline rate of 31.24%.

The reason for the actual freight rates received by the market being lower than the levels indicated by the index is primarily attributed to the pricing strategies adopted by shipping companies. Shipping companies typically balance supply and demand by allocating a mix of long-term contract rates (contractual rates) and spot market rates (current freight rates). Additionally, to attract major customers and maintain market share, shipping companies offer incentives such as special discounted rates and additional sailings, which further depress the actual freight rates charged. Despite the significant decline in freight rates, the current levels are still several times higher than the cost price.

Freight rates have experienced four consecutive weeks of decline, with the Europe route plunging by nearly 20% in a single week, and the US East Coast still has room for further adjustments.

The maritime freight market continues to undergo adjustments, with the latest SCFI released last week falling by 215.63 points to 2,510.95 points, marking a weekly decline of 7.9% and the fourth consecutive week of decline. Among the major routes, the Europe route experienced the most significant drop, close to 18%, followed by the Mediterranean route with a decline of nearly 12%, and the US East Coast route also recorded a decrease of nearly 9%.

Specific data shows that freight rates on the four major routes continued their downward trend last week:

·Europe route fell by USD 618 to USD 2,841/TEU, a decline of 17.86%.

·Mediterranean route decreased by USD 458 to USD 3,365/TEU, a drop of 11.98%.

·West Coast US rates dropped by USD 111 to USD 5,494/FEU, a decline of 1.98%.

·East Coast US fell by USD 673 to USD 6,838/FEU, a decrease of 8.96%.

Industry insiders indicate that as Christmas-related shipments have been dispatched in advance, freight rates are expected to continue trending downwards until the end of September. In response to market changes, shipping companies plan to arrange blank sailings starting from October. Furthermore, it is anticipated that the decline rate of the Mediterranean route will surpass that of the Europe route.

Regarding the East Coast US route, industry insiders believe there is still room for further freight rate reductions, as the discounted prices introduced last week have not been fully reflected in the market. Meanwhile, due to the anticipated effects of the National Day Golden Week holiday and the possibility of a strike by American dockworkers, shippers generally adopt a conservative wait-and-see attitude with limited willingness to ship. This may result in urgent orders shifting to the West Coast US route, thereby slowing down the decline rate on that route.