Container freight rates continue to drop across the board as trade tensions batter the sector.
The biggest hit was on the transpacific, where the escalating trade war between China and the US fuelled a drop of around 20% this month.
Freight rates from Shanghai to Los Angeles dropped nearly 10% in the week ending 19 May, down $137 to $1,399 per 40-foot container (feu). That added to a 9% drop in the previous week, according to the Freightos Baltic Global Container Index.
The rate is down from about $2,000 per feu between July 2018 and February this year.
Rates from Shanghai to New York fell by $67 to $2,845 per feu.
Alphaliner estimated that transpacific eastbound volumes could shrink by at least 8% this year if the trade war escalates. It suggested that exports from other Far East countries will not grow sufficiently to offset the expected reduction in cargoes from China.
Spot rates between Shanghai and Los Angeles have already fallen by about 30% this year. The delicate market balance has been upset further after duties on $200bn-worth of goods from China to the US — covering 5,700 products — were raised from 10% to 25% from 10 May.
Carriers have attempted to mitigate the weaker market by cancelling some sailings between China and the US West Coast. Although carriers were able to raise rates in April, they have been unable to increase them so far this month.
Container booking portal Freightos says space remains tight on vessels, so carriers are likely to try to raise rates again in June.
“Ocean rates from China to the West Coast tumbled 12% this month alone and are closer to last year’s rates than they have been in over 10 months,” Freightos chief marketing officer Eytan Buchman said. “But this could all change if the looming 25% tariff increase on the rest of Chinese imports [is] imposed.
“In the past, tariffs implemented with enough notice have prompted ocean freight rushes and could precipitate a summer price spike.”
Container spot rates between China and the US West Coast are still 17% higher for the year ending 13 May, according to freight rate benchmarking site Xeneta. But the 25% tariff on Chinese goods will affect the picture, as it “could be a life-and-death situation for international trade”.
Freightos said spot rates between China and the US East Coast remain stable at $2,845 per feu, due to a drought that has reduced capacity on the Panama Canal. It means rates on this lane are still 27% higher than last year.
Some tonnage providers seem publicly unfazed by the trade tensions. In a conference call last week, Danaos Corp chief executive John Coustas described tariffs as a relatively short-term issue. He said cargoes would continue to be sourced from China until alternatives had been located.
‘No change’
“Those alternatives are also in Asia,” he added. “So it’s not going to change the actual teu miles now for that kind of cargo.”
Rates between China and Europe remain unchanged at $1,415 per feu. But low demand between Asia and Europe led Maersk Line to announce a drop in spot rates in mid-May.
Xeneta reckons demand on that trade will increase: “Carriers are feeling confident for the remainder of the year as we enter the summer months, for most of the main trade corridors.”
