China-US West Coast prices climbed 17% in the past week due to tight capacity and a jump in demand, according to Freightos, with air freight markets also showing ‘some signs of a return to normal’.
China-US West Coast ocean rates have climbed 17% in the past week due to tight capacity and an “unexpected” jump in demand, lifting rates to their highest level since January 2019, according to digital rates specialist Freightos.
China-US West Coast prices jumped 17% since last week to an average of $2,160 per FEU, according to the FBX01 Daily index, lifting rates 48% higher than at this time last year. And Meanwhile, China-US East Coast prices increased 8% since last week, reaching $2,875 per FEU, and are 7% higher than rates for this week last year.
It said the rise in prices on the transpacific market was due to an “unexpected spike in demand” over the last few weeks combined with tight capacity.
But Freightos warned that celebrating a recovery in the market may be premature – although summer import projections are “better than they were a month ago”, ocean volumes to the US “are still expected to be down significantly through September.
“And ocean carriers agree, announcing 75 more cancellations this week, with more expected in the coming days,” noted Eytan Buchman, CMO of Freightos.
“So far 10-15% of sailings from Asia to Europe have been cancelled through August, and 5-10% have been blanked to the US.” He noted that the jump in demand had also resulted in some rolled shipments out of China, with some shippers reporting delays of up to two weeks to get on overbooked ships.
Some signs of a return to normal
But he said there are “some signs of a return to normal” for freight markets. “Air rates continued to decline from their near-record highs out of China as PPE demand cools, with Freightos.com marketplace data showing rates falling by 5-15% across lanes out of China since last week.
“Data from WebCargo shows a 63% increase in air cargo eBookings in May compared to April, as some shippers may be motivated by the recent decline in rates and some commercial cargo returns to the market. And after being hit hard by travel restrictions, some passenger air travel is also being restored, which will add capacity to the cargo market even as volumes dipped in the last few weeks.”
He highlighted that “there are also signs of life in US trucking employment, with Wall Street taking note, and eCommerce is still surging. As a result, both UPS and FedEx announced rate hikes for high-volume shippers this week, and logistics operators added thousands of jobs in May to keep up with the volume of orders.”
As reported in Lloyd’s Loading List, container lines last week announced further significant service cancellations to take effect from the third quarter, as ocean freight carriers try to maintain the freight rates they have achieved in recent months despite the drop in demand due to the coronavirus pandemic.
Consulting group Sea-Intelligence said there had been a sharp increase last week in the number of service cancellation announcements for the third quarter across the combined major deepsea trades from Asia to Europe and North America. For these trades alone, around 15% more capacity is being removed from the market in the announcements of the past week, taking the total amount of announced blank capacity for this year so far from 3.4 million teu to almost 4 million teu.
Although some blanked sailings have been reinstated on certain trades over the past few weeks, these had only served to reduce the number of cancellations and “by no means indicate a reversal to normal market status”, according to Sea-Intelligence.
“The data clearly shows that reinstatement of capacity cannot in any way be interpreted as a sign of strong demand,” Sea-Intelligence CEO Alan Murphy said. “That we are now seeing full ships on some trades, and even cargo rolling in ports in Asia, is clearly an indication that too much capacity had been removed, but not an indication of a reversal to norm.”
As also reported yesterday in Lloyd’s Loading List falling demand for air cargo capacity from China and Hong Kong has led to the start of “a more regular pattern” for commercial air cargo, in which the elevated rates of recent weeks begin to descend to more normal levels, according to US freight forwarder Flexport.
Flexport also said that the large numbers of ‘preighters’ – passenger aircraft flown purely for their cargo capacity – that airlines have been flying in recent weeks in response to the rush globally for personal protective equipment (PPE) from China “are expected to be retired through the summer”, with analysis by Seabury Consulting indicating that there has already been a drop in ‘passenger freighter’ capacity ex-China during the last two weeks.
Data from Seabury indicates that global air cargo capacity remains around 26% below levels for the same period in 2019, although capacity on certain key trade lanes to and from Asia is now above the levels this time last year. It also noted that ‘passenger freighter’ capacity declined last week, the first decrease after several weeks of increases, causing overall widebody belly capacity to fall by 4%, while freighter capacity remained stable.