Disruption Report #62 – UPS Strike Looking Likely, Cost of Shipping from China Down 60%, New Container Ships Are Arriving and Boosting Ocean Freight Capacity

Ominous Warnings About a Potential UPS Strike

The Disruption Report has, until now, focused on the ongoing labor negotiations between the dock workers and the Ports of Los Angeles and Long Beach. That may be small potatoes compared to the potential for a major strike by the Teamsters Union against UPS.

CNN headlines its article with this doom-filled header: “One of the biggest strikes in US history is brewing at UPS.” Here is how the article describes the threat:

Contract negotiations are set to begin in the spring between UPS and the Teamsters Union ahead of their current contract’s expiration at the end of July, 2023. Already, before the talks have even started, labor experts are predicting that the drivers and package handlers will go on strike.

A strike would have a seismic impact on the supply chain and e-commerce in particular. 6% of the nation’s freight moves by UPS. The article cautions that rival carriers like FedEx and USPS do not have the capacity to step in.

I will be keeping my eye on this one.

Cost of Shipping from china to the us Down 60%

The average cost of a forty-foot container from China to the United States now sits at $5400. Europe has not fared quite as well. The cost to ship a container from China to Europe averages $9,000. That’s still 42 percent lower than last year. That’s according to a September 5, 2022, Wall Street Journal article by Costas Paris entitled “Ocean Shipping Rates Have Plunged 60% This Year.”

“’For spot rates, the party is over,’ said Jonathan Roach, a container shipping analyst at London-based Braemar.”

“Ocean Shipping Rates Have Plunged 60% This Year,” Costas Paris, Wall Street journal, spetember 5, 2022

Toy Industry Average Spend on Containers from Asia Higher Than Average

Global Toy News ran a survey to determine how much toy industry members are paying for containers from Asia. Here is the result:

Based upon the Wall Street Journal report of $5400 as the average 40-foot container rate from China to the U.S., it appears that toy industry members can negotiate for much lower rates than they have been paying.

New Container Ships Will Ease Shipping Costs

The containerized freight industry went into a ship-building frenzy when demand exceeded supply over the last two years. These ships are arriving now and will continue to put downward pressure on shipping costs. According to the Wall Street Journal article cited above, the fleet will expand by almost 10% this year and next.

Its possible that we could see freight rates return to pre-covid levels.