SHIPPING lines might still get some revenue upside from the strike at US east and Gulf coast ports, but nowhere near what some stock traders had expected. The shortness of the shutdown — just three days — will limit the loss of effective vessel capacity and thus the tailwind for spot rates.

Container line stocks plummeted Friday as dockworkers returned to the piers.

In European markets, shares of Hapag-Lloyd sank 16% and those of Maersk fell 5%, with both equities erasing all of their gains since the beginning of September.

Shares of US-listed Zim — the most popular trading vehicle for wagering on strike fallout — fell by as much as 16% in mid-day trading on Friday and closed down 13% in quadruple average volume.

Zim’s share price has fallen 26% since September 30, after surging 40% during the month of September in anticipation of a big rate gain from the port shutdown.

Queues positive for rates but backlog dwindling fast

The strike queue reached 60 vessels totalling 363,620 teu on Thursday afternoon, just prior to the announcement of the strike suspension, according to vessel-position data from Lloyd’s List Intelligence’s Seasearcher.

Capacity tied up in queues at US east and Gulf coast ports should theoretically cause at least some shortages of vessels in loading ports as service schedules are delayed, a positive for rates.

However, the size of the ship backlog has fallen rapidly, raising questions about whether the US port disruption was significant enough to move the rate needle amid a backdrop of rising vessel capacity and falling import demand.

Thursday’s count of 60 ships in the queue included 11 feeder vessels at berths, mainly in South Florida. The offshore queue was 49 vessels.

The offshore backlog had fallen to just 20 containerships on both Saturday and Sunday.

When the strike ended, empty berths at US east and Gulf coast ports were quickly filled as vessels came in from offshore anchorages, which immediately reduced the offshore queue by more than half (in contrast, offshore queues during the supply chain crisis occurred when port berths were already full). More ships are continually arriving but not fast enough to keep the queue at former levels.  

With cargo moving again, ocean carriers including MSC, Maersk and CMA CGM have begun to cancel the strike congestion surcharges that were set to go into effect this month.

Upside from potential pull-forward of pre-Chinese New Year volumes

Another possible 4Q24 rate effect involves timing of pre-Chinese New Year cargoes.

The International Longshoremen’s Association and the United States Maritime Alliance did not come to a final agreement on a new contract. Rather, they tentatively agreed on salary increases, but are still negotiating the contentious issue of automation. They have extended the current labour contract until January 15, 2025.

“Shippers are not out of the woods just yet,” warned Xeneta chief analyst Peter Sand. “Automation is an issue the two sides have been unable to resolve in over a year of negotiations. Now they have just 100 days to reach an agreement, otherwise we could see further strike action.”

Cargo volumes to the US typically increase prior to the closure of Asian factories and terminals during the annual Chinese New Year holiday break. The date of this holiday changes every year. This year, it was on February 10. Next year, it is earlier, on January 29.

Thus, the normal pre-Chinese New Year increase in US import demand will coincide with the next strike deadline for the ILA.

In the case of the October 1 deadline, which resulted in an actual (albeit brief) strike, US importers frontloaded cargoes to avoid supply chain disruptions. It is possible that the new deadline could elicit a similar reaction, leading to more volumes than usual in December. 

Backdrop of continually falling spot rates 

But any positives for rates from US labour negotiations would come at a time when spot-rate fundamentals are under pressure.

Current US demand has been reduced by the pre-strike pull-forward in shipments. On the supply front, the onslaught of newbuilding deliveries continues.

Drewry’s World Container Index continues to decline, led by spot-rate reductions in Asia-Europe trades that were not affected by the US port strike. The WCI Global Composite declined to $3,489 per feu for the week ending Thursday, down 41% from its recent high on July 18 and back to levels seen in mid-May.