Shanghai reopening, itinerary cancellations and ILWU negotiations mark June as a key month
Shipments from Shanghai fell by 25% in April, due to lockdowns due to COVID-19, an amount by no means small. We will now have to wait for the impact on the ports of Los Angeles and Long Beach (LA-LB), when, as of June 1, a wave of containers and ships begins to be released, just as the shipping lines returned to implement programs of blank sailing and when there is a possibility that ILWU dockworkers may decide to initiate walkouts during their labor negotiations.
as described John Monroe, maritime, port and logistics industry analyst, the congestion in the port of Shanghai has eased slightly, but ship schedules still show many delays. Inland, road transport capacity has recovered, some areas near Shanghai such as Taicang, Zhangjiagang and Changshu are still in lockdown due to the resurgence of the epidemic which creates problems in container consolidation. In addition, some container yards are still affected by the difficulties of picking up/dropping off containers at the port.
In this context, the city of Shanghai begins its reopening process today, joining the companies in the city that were authorized to do so before, which is expected to result in a greater flow of containers to the port. However, are shipping lines ready and willing to accept bookings? interrogate Monroe, who estimates that the option they have taken is exactly the opposite: “the main operators are looking for rates to return to 2021 levels,” he indicates.
As a consequence, he anticipates that June may be a tight month in the hub ports of China, due to the programming of blank sailing by shipping lines for the entire month.
It cites data from Drewry that indicates lines have already canceled 10% of itineraries during weeks 22-26 (June) on the three main east-west routes. This represents 72 canceled itineraries, of which 68% or 49 correspond to the Transpacific route, largely destined for LA-LB. In particular, MSC and Hapag Lloyd deployed cancellation programs, while ONE announced 26 blank sailing this week through June.
This leads him to forecast rates rising in June, even as high as $10.000 on the China-USWC route before the end of the month. That, considering that the current rates, between US$7.000 and US$7.500, are 50% below their peak, which of course the shipping lines seek to remedy.
Container avalanche?
But will there really be an unstoppable wave towards the USWC like the one that occurred in 2021? John Monroe, states in this regard that it is possible “that it is not a big deal”. ¨He projects that, of course, there will be more ships and containers arriving at the USWC. But at the same time, he describes that warehouses are full and many of the big importers are reducing orders, to which shipping lines are responding by applying blank sailing previously described. Perhaps, in a first sign of the anticipated reaction to the drop in the pace of demand.
Negotiations with the ILWU
This June 1 is also the date that the International Longshore and Warehouse Union (ILWU) resumes its negotiations with the Pacific Maritime Association (PMA). Seven years have passed since the last negotiation (2015), and on that occasion, activity almost came to a standstill in the five main USWC ports, he recalls. Monroe.
Explain that, of course, there will be standard issues of wages, hours and working conditions. But he argues that the sticking point is most likely to be automation. In fact, it states that the PMA published a study in early May that concluded that automation, contrary to popular belief, increased job growth for ILWU workers.
For its part, the ILWU responded that automation has meant less work at non-automated terminals. Isn't that what automation is supposed to do? Eliminate redundant tasks? Harold Daggett, president of the International Longshore and Warehouse Union (ILA), announced that he would support the ILWU and fight automation “tooth and nail”.
Explains monroe, the great advantage of automation is the increased density of the yard within the terminal. An automated terminal can handle 50% to 75% more containers moving through its yard than a non-automated terminal. “You would think this would be a good thing. Apparently not. Let the games begin! June can be a very intense month.”
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