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US Ports In for Market Dynamics Shift as East and West Coasts Eye Dominion

March 9, 2015

The US East Coast (USEC) ports, which have benefited the most from the West Coast labor contract dispute, seeing record monthly throughputs, should brace themselves for another shift in market dynamics.

Spot rates from Asia to the USEC are now typically x2.1 higher than to the USWC, up from an average of x1.6 through 2013 and the first five months of 2014, according to Drewry’s Container Freight Rate Insight.

This is mostly due to liners’ shift toward East Coast ports triggered by delays and backlogs at the West Coast.

“The cargo shift to the USEC is not a new phenomenon as imports from Asia have significantly outpaced growth to the USWC since the start of the century,” Drewry said. ” This has contributed to the USEC rate inflation, but the USWC issues have widened the pricing differential even more.”

Nevertheless, most of the diverted cargo is expected to return to West Coast ports as they rush to clear the cargo backlog at their terminals.

Once the backlog is resolved, Drewry expects to see most of the diverted cargo return, which in turn will lower USEC rates and once again re-shape the market dynamics.

“How much, it’s difficult to say, but if the USEC rate differential is reduced significantly some shippers might prefer to maintain that routing option, especially as more slots become available through greater use of the Suez Canal routing and the wider Panama Canal. On the flipside, the USEC labour contract is due to expire in September 2018 so a repeat of the recent situation would inevitably swing things back in the USWC favour temporarily,” Drewry added.

The question remains how much time will it take for the West Coast ports to unclog their terminals and restore normal operations. Initial estimates indicate that this could take up to two months, as stated by the Port of Oakland.

Regaining confidence remains as on one of the key challenges ahead for the USWC ports in addition to the relative price competitiveness of alternative routes, Drewry said.