Multiple shipping companies have planned significant price hikes due to the potential strike on the East Coast of the United States, but Maersk and Hapag-Lloyd have not followed suit, and the industry is pessimistic about it. Affected by the increased tariffs and the risk of strikes, American importers have made advance purchases, bringing forward the end of the peak season. The industry believes that significant price hikes are unrealistic and predicts only minor increases or price hikes through reducing flights. The impact of the strike on freight rates depends on its duration, and some goods may be rerouted to the West Coast of the United States for import and then transported to the East Coast.

In anticipation of a potential strike on October 1 on the East Coast of the United States, multiple shipping companies have announced plans to significantly adjust freight rates for routes to the United States. Non-alliance shipping companies have claimed an increase of USD 4,000 per TEU (Twenty-foot Equivalent Unit), while some Asian-based alliance shipping companies have planned to raise prices by USD 2,000 on October 1, with an additional plan to further increase by another USD 2,000 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 are generally pessimistic about this round of significant price hikes.

The head of a major freight forwarding company pointed out that due to the impact of increased tariffs in the United States and the risk of strikes at East Coast ports, American importers have accelerated their procurement and inventory replenishment efforts in advance, 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, shipments loaded after October 1 will arrive at the East Coast of the United States near the end of November, by which time any strikes or work slowdowns may have subsided. Moreover, 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 increasing prices by USD 300 to 500 per TEU or by reducing sailings to raise freight rates, but the previously announced substantial price hikes of USD 2,000 to 4,000 appear unrealistic.

Additionally, with seasonal declines in cargo demand and increased capacity supply in the fourth quarter, freight rates are more likely to decline rather than increase. Regarding the East Coast dockworkers' strike, considering the proximity to the US presidential election, the possibility of government intervention to mediate 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 West Coast of the United States for import and then transported to the East Coast via rail, which could help support freight rates on the West Coast. The actual impact of the strike on freight rates will depend on its duration. Senior 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. Executives from Asian shipping companies, on the other hand, believe that a price increase of USD 300 to 500 per TEU is reasonable, but given market supply and demand conditions and competition from low-cost non-alliance shipping lines, there is limited room for price hikes, which are mostly short-term phenomena.

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

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

Freight rates have experienced four consecutive weeks of declines, with European routes seeing a nearly 20% drop in a single week, while further downward adjustments are still possible for the East Coast routes.

The freight rates in the shipping market have continued to undergo adjustments, with the latest Shanghai Containerized Freight Index (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 European route experienced the most significant drop, close to 18%; the Mediterranean route followed closely with a drop of nearly 12%; and the East Coast route of the United States also recorded a decline of nearly 9%.

Specific data shows that the freight rates of the four major routes continued to show a downward trend last week:

·The European route fell by USD 618 to USD 2,841 per TEU, a decrease of 17.86%;

·The Mediterranean route declined by USD 458 to USD 3,365 per TEU, a drop of 11.98%;

·The West Coast of the United States route decreased by USD 111 to USD 5,494 per FEU, a decrease of 1.98%;

·The East Coast of the United States fell by USD 673 to USD 6,838 per FEU, a decline of 8.96%.

Industry insiders indicated that due to the early shipment of Christmas-related goods, freight rates are expected to continue to decline until the end of September. In response to market changes, shipping companies plan to arrange blank sailings starting from October. Additionally, the Mediterranean route is expected to experience a faster decline than the European route.

Regarding the East Coast route of the United States, insiders believe that there is still room for further freight rate declines, as the discounted prices introduced last week have not yet been fully reflected in the market. Meanwhile, influenced by the anticipation of the National Day Golden Week holiday and potential strikes by American dockworkers, shippers generally adopt a conservative wait-and-see attitude with limited willingness to ship. This may lead to a shift of urgent orders to the West Coast route, thereby slowing down the decline in freight rates for that route.