MARKET BRIEF | January 2025
ILA Strike Averted
The night of January 9, the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) reached a tentative agreement on a new six-year master contract. This deal averts the possibility of a work stoppage that could have disrupted U.S. ports along the East and Gulf Coasts starting this week. The agreement, which is currently going through review and ratification by both parties, includes protections for current jobs while introducing measures to modernize ports through technology – aiming to enhance safety, efficiency, and supply chain capacity. Port automation has been the subject of contentious debate between the two parties. However, the tentative framework positions technology as a job creator rather than a job eliminator, reflecting a compromise aimed at balancing modernization with labor protections.
Port Congestion in Vancouver
The Port of Vancouver is experiencing congestion due to a container backlog from December, driven by several factors: vessel bunching at Asian ports, a pre-Lunar New Year cargo surge, a November dockworker foremen strike, and winter-induced shorter train lengths. These issues caused rail container dwell times at the port’s terminals to rise to 6.9 days in December, up from 5.2 days in November and 4.5 days in October. Additionally, winter weather and increased cargo volumes have led to more vessels awaiting entry. Terminal operators and railroads are addressing the backlog and anticipate improvements by month’s end, as import volumes are expected to decline with many Asian factories shutting down for the Lunar New Year starting January 29.
Shippers Still Avoiding the Suez Canal
Container lines are likely to continue routing ships around the Cape of Good Hope until late 2025, despite potential resolutions to the Red Sea crisis. Network changes required for resuming Suez Canal transits are complex and disruptive, leading carriers to prioritize stability over quicker routes. Past disruptions, such as those caused by attacks on commercial vessels in the Red Sea, have made carriers cautious about reverting to risk-prone areas prematurely. Shippers also prefer the Cape route, favoring longer transit times over risks associated with potential attacks and costly consequences like general average (GA) declarations. Insurance may not cover damages or clean-up costs in high-risk zones, deterring reliance on the Red Sea even with the involvement of naval escorts. While CMA CGM has introduced escorted Suez services, shipper reluctance underscores ongoing concerns. However, competitive pressures may eventually push carriers to resume Suez transits when risks subside, as the route offers faster and cheaper shipping options.
Good & Bad News for Dwell Times
Rail container dwell times at Southern California’s ports have improved significantly in recent weeks, but an upcoming surge in imports may challenge this progress. Average dwell times at the Los Angeles and Long Beach ports fell to about 4.5 days this week, down from a two-year high of 9.86 days in October. However, November’s average of 7.67 days remains nearly double the 3.9-day average from November 2022. Terminals like Yusen in Los Angeles report that their container backlogs have largely cleared since mid-November. Despite these improvements, the ports are bracing for higher volumes, with a combined 272,354 TEUs of imports expected next week, up from 200,000 to 210,000 TEUs in recent weeks. Robust imports are likely to continue this month as shippers rush to beat impending tariffs, raising concerns among forwarders about potential rail delays. Terminal operators highlight that rail dwell times vary based on cargo mix and infrastructure. Efficient operations depend on inland point intermodal (IPI) containers comprising 20%-30% of total cargo. Older terminals with retrofitted on-dock rail yards often face more operational challenges than newer facilities designed with integrated rail systems.
