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Trans-Pacific container rates are up (a little) in November

usscmc by usscmc
November 8, 2019
Trans-Pacific container rates are up (a little) in November
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The good news for container lines is that trans-Pacific box shipping rates actually did improve in early November, just as forecasters had previously predicted. The bad news is that rates remain well below where they were at this time last year. From a year-on-year perspective, it’s too little, too late.

The daily price to transport a 40-foot-equivalent unit (FEU) container is tracked along various routes by the Freightos Baltic Daily Index. On the China to U.S. West Coast trade lane (SONAR: FBXD.CNAW), the price on Nov. 7 was $1,482 per FEU, up 16% from the recent low set on Oct. 8, but still down 43% from the $2,588/FEU price as of Nov. 7, 2018.

In Drewry’s Nov. 7 report on its World Container Index, the U.K.-based consultancy reported that over the previous week, “freight rates from Shanghai to New York spiked $113 and reached $2,639 for a 40-foot box,” while rates on the Shanghai-Los Angeles route showed a “marginal increase.”

Drewry predicted that “trans-Pacific eastbound rates are likely to go up in the coming weeks, with shippers bringing forward cargo movements to avoid tariffs scheduled to be imposed on Dec. 15.”

Flexport, the tech-centric, California-based freight forwarder, noted in its latest market report that in the Asia-U.S. trades (to both coasts), rates are up, with a general rate increase implemented on Nov. 1 and another planned for Nov. 15. “Space is tight” and there is “[cargo shipment] rolling in certain regions with blank sailings,” said Flexport.

Last year, peak-season trans-Pacific rates hit their highest level in mid-November, implying that rates are now nearing their high point for 2019. This year’s pricing curve in the trans-Pacific is relatively close to that seen in 2017, which would appear to confirm that 2018 was anomalously strong. Last year, U.S. companies heavily pre-imported cargoes ahead of tariff deadlines, on the premise that tariff savings would trump extra inventory and storage costs.

The fact that trans-Pacific pricing has remained muted in the second half of 2019 implies that the container-shipping industry continues to face a vessel-supply overhang.

Lackluster rates have occurred during a period when container lines have been “blanking” (skipping) a significant number of sailings to artificially reduce capacity and support rates, and also, at the same time a substantial number of large container ships have been out of service and at the yards for scrubber retrofittings (the IMO rule requires all ships without scrubbers to switch to more expensive low-sulfur fuel starting Jan. 1). Those retrofitted ships will be back in service in 2020.

Editor’s note: Freightos has a business agreement with FreightWaves that includes editorial coverage.

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