Data released by the Shanghai Shipping Exchange on September 6 showed that the Shanghai Containerized Freight Index (SCFI) plunged 236.8 points to 2,726.58 points, with the weekly decline expanding to 7.99%, marking the third consecutive week of decline. None of the four major shipping routes were spared, with the Eastbound routes from the US to China and Europe suffering the hardest hits, plunging by 11% and 10.76% respectively, while the Westbound routes from the US to China and the Mediterranean routes also declined by 6.37% and 8.71% respectively.

The reasons behind this freight rate decline are complex and diverse, primarily attributed to the intensifying contradiction between excess vessel supply and insufficient cargo demand, coupled with slowing demand in European and American markets and the looming shadow of a potential strike on the East Coast of the US.

Shipping companies had originally hoped for a small peak season before the National Day holiday and planned to raise freight rates on US routes on September 15. However, most freight forwarders hold a pessimistic view, believing that it would be difficult to achieve a price increase, and are closely monitoring the progress of labor negotiations between the International Long shore men's Association (ILA) and its employers, particularly the potential strike that may erupt on October 1.

The labor contract in LA is set to expire on September 30, and if the two parties fail to reach an agreement on a new contract, the President of the ILA has made it clear that a strike will commence on the morning of October 1. This strike threat is particularly severe, as the last strike on the East Coast dates back to 1977, lasting 44 days and having a profound impact on supply chains. Moreover, during the negotiation of the new contract, the conditions proposed by the ILA far exceed the scope acceptable to the employers, and coupled with the employers' insistence on automation at the terminals, the divergence between the two sides is significant. Even if a full-scale strike does not occur, there may still be work slowdowns, causing significant disruptions to the supply and demand in the container shipping market.

Industry insiders generally agree that both strikes and work slowdowns will severely disrupt supply chains, especially considering the ongoing impact of the Red Sea crisis, where even a brief strike could lead to months of recovery for terminal operations, subsequently affecting global shipping schedules and terminal operations. Consequently, some logistics giants are urging their clients to expedite shipments to avoid potential risks.

The uncertainty surrounding the East Coast strike is prompting some clients to adopt a wait-and-see attitude and delay shipments, while shippers eager to expedite their shipments may opt for rerouting to the West Coast, quickly driving down freight rates on the East Coast route and potentially dragging them down further in the coming weeks. However, if cargo volumes successfully shift to the West Coast, it could alleviate the downward pressure on freight rates on that route and may even stabilize or reverse the decline within the next few weeks.

In the long run, the specter of an East Coast strike may present a "short-term negative, long-term positive" scenario for shipping companies. If a strike materializes, the massive influx of cargo to the West Coast could trigger new supply chain bottlenecks, driving freight rates upwards against the trend. Additionally, labor negotiations against the backdrop of the US presidential election add another layer of uncertainty, as unions demand that foreign shipping companies, which have reaped significant profits during the pandemic, do not adequately compensate American workers. This struggle transcends economic interests and represents a confrontation between American workers and foreign shipping companies.

Latest SCFI Freight Rate Index as of September 6:

l   Far East to Europe: USD 3,459/TEU, a decrease of USD 417, with a weekly plunge of 10.76%.

l   Far East to Mediterranean: USD 3,823/TEU, a decrease of USD 260, with a weekly decline of 6.37%.

l   Far East to West Coast America: USD 5,605/FEU, an increase of USD 535, but still showing a weekly decline of 8.71% (note: the initial description may have been a typo, as typically an increase would not be framed as a decline).

l   Far East to East Coast America: USD 7,511/FEU, a decrease of USD 928, with a weekly steep drop of 11%.

l   Persian Gulf Route: USD 1,509 per container, a weekly decrease of USD 247, representing a weekly sharp decline of 14.07%.

l   South America Route (Santos): USD 7,523, a weekly decrease of USD 175, with a weekly decline of 2.27%.

For Short-Sea Routes:

l   Far East to Southeast Asia Route (Singapore): USD 467 per container, a weekly decrease of USD 30, representing a decline of 6.03%.