The West Coast spot rate Friday was $2,794 per FEU, while the East Coast spot rate was $3,334. Photo credit: Shutterstock.com.
Spot rates on the eastbound trans-Pacific remained stable for the second consecutive week Friday as carriers look ahead to their next potential general rate increase (GRI) on Aug. 1 if US imports from Asia do not diminish.
Carriers implemented almost four dozen blank sailings between early June and mid-July. A spike in imports from Asia consisting of seasonal merchandise, personal protective equipment (PPE), and goods that retailers required for inventory replenishment — coupled with canceled sailings — kept spot rates at 10-year highs.
David Bennett, president of the Americas at Global Express Services, told the JOC Midyear Container Shipping Outlook Thursday that capacity management by carriers in the largest US trade lane continues to prop up freight rates.
“Carriers have really been aggressive. They kept capacity below demand,” Bennett said.
Spot pricing from Shanghai to the US West Coast on Friday reached $2,794 per FEU, up 0.4 percent from last week and 68.4 percent from the same week in 2019, according to the Shanghai Containerized Freight Index published under the JOC Shipping & Logistics Pricing Hub. The East Coast spot rate of $3,334 per FEU was up 1.1 percent from last week and 16.4 percent year over year.
Carriers last month filed advance notice with the Federal Maritime Commission for rate increases of as much $1,000 per FEU for July 15. However, the West Coast spot rate increased only $11 and the East Coast rate increased $37 from last week.
But carriers are optimistic they will retain a larger percentage of the GRIs pre-filed for Aug. 1, based on current market conditions in the eastbound trans-Pacific and their success in implementing three GRIs in June.
“The key thing right now is the strength of the market,” a container carrier spokesperson who asked not to be identified told JOC.com Friday. He said the carrier’s internal analysis calls for a strong third quarter for import volumes.
US imports of PPE and back-to-school merchandise have been robust, Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation (NRF), told the JOC webcast.
“Back-to-school is looking good, driven by electronics,” he said.
By keeping capacity below demand, carriers have been able to roll shipments to subsequent voyages, unless the customers are willing to pay a “priority loading” charge to get their shipments on the vessels, Bennett said. That has led to a minimum of a one-week roll, but in some cases, shipments are rolled for two consecutive weeks, which has kept spot rates elevated, Bennett said.
In his weekly newsletter for non-vessel operating common carriers (NVOs), Jon Monroe said vessel space out of China is expected to remain tight through the first week of August. Retailers and NVOs normally give carriers at least two weeks advance notice of their booking intentions.
“We have heard some carriers say that they are expecting strong demand through September,” Monroe added.
Bulk of blank sailings are over
Given the forecasts, carriers are pulling back on blank sailings, Alan Murphy, CEO of Sea-Intelligence Maritime Consulting, said in his Sunday Spotlight newsletter this week. Carriers canceled 45 sailings from June 1 through mid-July, but so far have announced only 14 blanks from mid-July through August, he said.
The peak shipping season in the eastbound trans-Pacific normally runs from August through October. The carrier executive said he expects the “stop-and-go” gyrations in the trade to continue for the rest of the summer, but shipments of holiday merchandise will pick up in the fall.
There is too much uncertainty in the market right now due to the resurgence in COVID-19 cases in the United States, the impact of store reclosures in some regions, and the tariff situation in the US-China trade war, to confidently predict what the holiday shopping season will look like this year, Gold said.
Global Port Tracker, which is published monthly by the NRF and Hackett Associates, in its July issue projected that year over year, US imports will decline 13.3 percent in August, 12.3 percent in September, 9.9 percent in October, and 0.6 percent in November. GTA Forecasting, a division of IHS Markit, projects US imports from Asia in calendar year 2020 will decline 7.6 percent from 2019.
Gold said the picture for the rest of the year is unclear. “Retailers will be cautious,” he said.
Contact Bill Mongelluzzo at [email protected] and follow him on Twitter: @billmongelluzzo.
