January 2025 Freight Rate Update: Strike Threat Averted and What It Means for Retailers

Introduction:

Ocean and air freight rates have surged at the start of 2025, with significant increases on trans-Pacific and transatlantic routes. For retail businesses, this means higher shipping costs and potential delays that could affect product availability.

On a positive note, the threat of a strike at U.S. East Coast and Gulf ports has been averted. In January 2025, the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) reached a tentative six-year agreement. This deal replaces the expiring contract, which had been extended following a short strike in October 2024. The agreement covers approximately 25,000 union workers at 14 ports from Texas to Boston, ensuring continued operations and stability for U.S. supply chains.

While the strike risk is resolved, freight rates continue to climb, and global supply chain disruptions remain a challenge for retailers. Here’s what these developments mean for your business.

Global Issues Overview:

Freight Rate Increases:

Ocean Rates:

• Asia–U.S. West Coast: Rates surged by 23%, reaching $5,929 per 40-foot equivalent unit (FEU).
• Asia–U.S. East Coast: Rates rose by 13%, now at $6,934/FEU.
• Asia–Northern Europe: Rates increased by 8%, reaching $5,558/FEU.
• Asia–Mediterranean: Rates increased by 3%, reaching $5,630/FEU.

Air Rates:

• China to North America: Airfreight rates rose by 8%, reaching $6.15 per kilogram (kg).
• China to Northern Europe: Airfreight saw a 20% drop to $3.44/kg.
• Northern Europe to North America: Rates fell by 8%, now at $2.12/kg.

For retail businesses, these rising freight rates translate into higher costs for goods that must be passed along to consumers or absorbed as part of your operational expenses. As international shipping becomes more expensive, you may need to rethink your pricing strategies, product margins, or even your sourcing decisions to maintain profitability.

UPDATE: ILA-USMX Strike Threat Resolved:

The recent announcement of a tentative agreement between the ILA and USMX has removed the threat of a strike at U.S. East Coast and Gulf ports. This agreement, which was reached in January 2025, is now awaiting ratification by ILA members. It replaces the previous contract, which had been extended after a short strike in October 2024. The new six-year agreement ensures that dockworkers will continue to operate under the current contract until the new master contract is finalized. As a result, retail businesses can breathe a sigh of relief, knowing that major U.S. ports will remain operational, helping to maintain the stability of supply chains.

The agreement covers approximately 25,000 union workers handling containerized cargo at 14 ports and maritime cargo centers, spanning from Texas to Boston. While the immediate risk of congestion and backlogs due to a strike has been avoided, there are still potential disruptions to consider. Rising freight rates, congestion at global ports, and logistical bottlenecks remain key issues affecting retailers’ ability to manage their supply chains efficiently.

Forecast and Impact on Freight Rates:

Despite the positive news regarding the strike, freight rates continue to climb, especially on key trans-Pacific and transatlantic routes. Retail business owners should prepare for continued high shipping costs and potential delays due to ongoing global supply chain issues.

Transpacific Rates:

• Rates to the U.S. West Coast and East Coast have climbed sharply in January, with West Coast rates reaching $5,929/FEU (up 23%) and East Coast rates increasing by 13% to $6,934/FEU.
• The Lunar New Year rush and frontloading ahead of potential tariff hikes are putting further strain on these routes, making it harder to secure space on vessels and raising prices even more. Retailers should prepare for continued high rates and possible delays as seasonal demand combines with global logistics challenges.

Asia to Europe:

• Rates from Asia to Northern Europe are now at $5,558/FEU (up 8%), while Mediterranean routes are sitting at $5,630/FEU (up 3%).
• Congestion at key Asian ports due to delays in loading and unloading, as well as the aftermath of the strike threat, may push these rates higher. Retailers relying on European imports should plan for potential delays and equipment shortages, which could further elevate prices.

Air Freight:

• Air rates have started to stabilize after the peak season. However, airfreight to North America remains elevated at $6.15/kg, and while rates to Northern Europe have dropped by 20%, the overall trend remains higher than pre-peak season levels.
• For retailers with a heavy reliance on air freight for fast-moving or perishable goods, the high cost of air shipping will continue to impact margins. You may want to consider alternative transport methods or adjust inventory levels to account for the higher shipping costs.

What Retailers Can Do Now:

Given the ongoing freight rate increases, retailers must act proactively to mitigate supply chain disruptions. Here are some steps to take:

Diversify Port Options:

• Even though the strike has been averted, it’s wise to diversify your port usage to spread out the risk. While the U.S. East Coast ports are back to full capacity, consider using West Coast or even alternative smaller ports to reduce congestion risk.

Advance Container Pickup and Return:

• With potential delays still in the system, make sure to pick up or return containers early. This proactive approach will give you more flexibility to adjust your inventory needs as global disruptions continue to affect supply chains.

Prepare for Rate Increases:

• Plan ahead for continued shipping cost increases and factor these into your budgeting. If possible, negotiate with carriers to lock in rates or explore alternative transport options to mitigate the impact.

Monitor Ongoing Supply Chain Developments:

• Stay updated on global freight developments, including any further congestion or changes in shipping routes. Being proactive and adaptable will help you navigate through any additional disruptions.

Adjust Sales and Inventory Forecasts:

• While the strike has been avoided, global freight rates remain high. Revise your sales and inventory forecasts to account for any potential delays or increased shipping costs in the coming months. Early planning can help retailers avoid stockouts and manage customer expectations.

Conclusion:

While the threat of a strike at U.S. East Coast and Gulf ports has been successfully averted, rising freight rates and ongoing global supply chain disruptions remain key challenges for retail business owners heading into 2025. Retailers must stay vigilant, monitor shipping developments, and adapt supply chain strategies accordingly. By staying informed, adjusting forecasts, and diversifying logistics options, retailers can better navigate the evolving landscape and manage the impact of higher costs and potential delays.

Original article source: “January 7, 2025 Update,” published by Freightos on [Jan. 7, 2025].

Additional article source: “ILA, USMX reach contract agreement on automation, avoiding port strike” published by Freight Waves on [Jan. 8, 2025].