Sep 26, 2024 at 3:57 PM EDT 

The increasing likelihood of a dockworker strike next week at container terminals along the US East and Gulf coasts will tie up approximately 1.7% of global shipping capacity if it lasts a week, tightening the supply of equipment and vessels as the Red Sea diversions have, but on smaller scale, HSBC said in a report Thursday. The global bank said a weeklong strike will negate about 500,000 TEUs of overall capacity — approximately 1.7% of the global fleet — due to ships anchored during a potential stoppage. For comparison, analysts estimated that Red Sea diversionsaround Africa’s Cape of Good Hope have tied up 5% to 9% of effective global capacity. “A prolonged strike will extend the capacity tightness to early 2025, keeping freight rates buoyant for longer,” HSBC said. As the looming deadline approaches, many East Coast ports have announced contingency plans for a potential strike, while other affected industries, such as trucking, have implemented their own proactive measures to minimize the impact. Ocean carriers are considering options to mitigate losses. “THE Alliance will try its best to look at the entire situation, and then, if necessary, may respond by jumping ports so that ships can leave the eastern United States as soon as possible," Yang Ming President Cliff Pai said during an investors’ webinar on Wednesday. Yang Ming is part of THE Alliance with HMM, Ocean Network Express and, for now, Hapag-Lloyd.

Minimal help from West Coast 

While West Coast ports will serve as the most likely alternative in the case of port closures along the East and Gulf coasts, they’re unlikely to be able to absorb all the diverted volumes, HSBC said in its report. “Considering the peak throughput during the COVID-19 pandemic as a measure of potential capacity, and average throughput for the month of October in 2018–23, we estimate that [West Coast] ports could additionally handle only 17% to 18% of cargoes diverted from [the East and Gulf coasts] during a strike,” the bank said. HSBC said 90% of cargoes from Europe, the Caribbean and the east coast of South America are typically brought into ports on the East and Gulf coasts and lack viable options in the event of a strike. “Canadian and Mexican ports are less equipped to handle the spillover,” HSBC said. Amid diversion concerns, Sea-Intelligence Maritime Analysis estimates that a oneday work stoppage would take ports six to seven days to recover, while a two-week disruption would push the recovery into next year. Port directors tell the Journal of Commerce they can recover in weeks if a work stoppage doesn’t go longer than a few days, pointing to how they’ve been able to clear cargo when severe weatherclosed terminals. Pai said few Yang Ming clients on the East Coast have requested to shift cargo to the West Coast, citing customer uncertainty over the ability of ports there to handle the heavy volumes. Those concerns also hold for ports in Mexico and Canada, he indicated. Pai said that freight rates will be largely dependent on the length of the stoppage, but signaled increases could be on the horizon with the capacity limitations, despite a peak season mostly in the rearview amid early summer front-loading. ”But the impact may depend on the length of the strike, so we have no way to predict how much freight rates will increase,” he said.