Transpacific ocean freight rates fall to 48-week low

Volatile global trade environment and carrier oversupply push prices below their level last year, although blanked sailings by lines look set to deliver June price increases.

Transpacific ocean freight rates from China to the US West Coast have fallen to a 48-week low, according to the latest container freight price update based on the Freightos Baltic Index, with the volatile global trade environment and carrier oversupply blamed for pushing rates below their level last year.

Digital freight rates specialist Freightos noted that at $1,239/FEU, China-US West Coast rates have dipped under May 2018 levels for just the second time this year, adding: “While an impending GRI driven by blanked sailings is anticipated, rates are currently down a full 22% from early April and 6% from last week.”

China-US East Coast prices are at $2,622/FEU, also having dropped 6% from $2,776/FEU last week. Prices are still 15% higher year on year, chiefly because of the Panama Canal’s capacity reduction, Freightos noted.

China-Europe prices, meanwhile, are at $1,357/FEU, down 4% on last week’s $1,282/FEU, “indicating that the typical pre-Summer rush to import to Europe may not bolster prices”.

Eytan Buchman, CMO at Freightos, commented: “2019 started off with transpacific rates 60% higher than this time last year. That gap has been in a free-fall ever since.” He blamed “mercurial global trade and carrier oversupply, combined with a flurry of tariffs” for pushing rates below their level at the same period in 2018.

“In an effort to buck this trend, carriers have blanked sailings and are indicating June price increases. However, the real trump card for transpacific rates – at least in the short-term, are the Chinese threats to cut off rare earth exports to the US.

“If these materialize, they may likely spur a US retaliation in the form of additional 25% tariffs on the remaining, untaxed, 57% of US imports from China. In turn, this could trigger a spike of tariff-beating exports and, potentially, a much-needed early peak season for carriers.”

In Drewry’s latest analysis of ocean freight spot rates, he composite index of the World Container Index (WCI), assessed by Drewry, decreased 1.5% this week compared with last week and was 6.9% down as compared with same period of 2018. Meanwhile, the average composite index of the WCI for year-to-date is US $1,485 per 40ft container, which is $21 higher than the five-year average of $1464 per 40ft container.

Within Drewry’s composite WCI decrease of 1.5% to reach $1,290 per 40ft container, freight rates from Shanghai-New York declined by $154 and stood at $2,502 per feu. Rates on Shanghai-Los Angeles plummeted $73 to reach $1,262 per 40ft box.

Similarly, rates on Rotterdam-New York dropped $71 to touch $2,272 per 40ft container. Conversely, freight rates on Shanghai-Genoa increased by $40 and stood at $1,452 per 40ft box.

Drewry expects that rates will increase next week.

Source: Lloyd’s