U.S. East, Gulf coasts rates strong
A specter has been haunting rate negotiations for Asia-U.S. trades this year — the memory of the contract dispute between employers and longshore workers in 2002 that resulted in hundreds of ships being unable to discharge cargo at West Coast terminals for 10 days and follow-up congestion at the ports that took months to clear.
One result, said Peter Keller, president of NYK Line (North America), is that while contracts for container services calling the West Coast from Asia will renew at relatively flat levels this year, there will be an uptick in rates for cargo moving on all-water container services to the U.S. East and Gulf coasts.
This is a reflection of high demand by shippers who do not want to have all their cargo moving through West Coast ports in 2008.
If carriers want space on all-water services in 2008, Keller noted, they better be signing up for it this year.
Noting that some negotiations are still ongoing, Keller said it was premature to quantify the differences in renewing rates on the different coasts.
Keller said intermodal landbridge services to the East Coast or inland points will also be higher, as ocean carriers pass along rate hikes from the railroads.
The contract negotiated in 2002 between employers and workers represented by the International Longshore and Warehouse Union will be up for renegotiation in 2008.
Workers at ports on the East and Gulf coasts are represented by a different union, the International Longshoremen’s Association, and after the 2002 strike many shippers talked about splitting cargo volumes through ports represented by different unions to reduce the risk of supply chain disruption.
Keller, speaking at the Bear Stearns Global Transportation Conference in New York Tuesday, said negotiations with the ILWU in 2008 are likely to focus on the issues of technology and productivity.
He noted that terminals need to move more containers through the same size terminals because opportunities for expansion are limited.
“We are no longer allowed to pave the waterfront,” he said.