Spot rates in the eastbound trans-Pacific this week continued to surge, blowing past $3,000 per FEU to the US West Coast in anticipation of an Aug. 1 general rate increase (GRI), the fourth such increase in the last six weeks.
Two non-vessel operating common carriers (NVOs) told JOC.com Friday they think the rates will stabilize at this week’s lofty levels for at least the month of August, moving slightly up or down each week depending upon demand.
The Asia–US West Coast spot rate Friday surged 17.1 percent from the previous week to $3,167 per FEU, while the East Coast rate increased 6.9 percent to $3,495 per FEU, according to the Shanghai Containerized Freight Index (SCFI) published in the JOC Shipping & Logistics Pricing Hub. These exceeded the 10-year-high rates of $2,794 per FEU to the West Coast and $3,334 to the East Coast recorded on July 17.
Pricing to the West Coast was a stunning 121 percent higher than the spot rate of $1,433 per FEU on Aug. 1, 2019, and the East Coast rate was up 24.8 percent, according to the SCFI. The NVOs said space is still tight on vessels leaving Asia because of the dozens of blanked sailings carriers implemented this summer.
Carriers have announced only three more blank sailings to the West Coast and three to the East Coast through mid-September, according to Sea-Intelligence Maritime Consulting. That indicates carriers believe supply and demand should remain in balance for the next six weeks, the forwarders said.
Demand up across the board
According to PIERS, a sister product of JOC.com within IHS Markit, volumes of US imports from Asia plummeted 8.7 percent year over year in the first six months of 2020 as the economic effects of the COVID-19 crisis sapped consumer demand. But both forwarders said volumes have picked up considerably in July.
David Bennett, president of the Americas at Globe Express Services, said imports across multiple product categories are contributing to the increase in volumes, with personal protective equipment (PPE), fall apparel, furniture, and houseware leading the charge. “It’s all segments,” he said.
The spike in rates this week occurred as all carriers in the eastbound trans-Pacific increased their rates in line with the GRIs that carriers had pre-filed last month with the Federal Maritime Commission (FMC), said Christian Sur, executive vice president of sales and marketing at Unique Logistics International. “Everyone’s above $3,000,” he said.
However, neither NVO expects rates to increase much higher. As they do every month, many carriers have pre-filed GRIs of about $1,000 per FEU with the FMC for Aug. 15, but the forwarders do not anticipate increases in mid-month. Sur noted that after scoring rate hikes twice in June and again on July 1, carriers backed off from GRIs pre-filed for July 15.
“It’s challenging for customers, obviously, and carriers are aware of that. They’re getting pushback,” Sur said.
Rather than going after more GRIs, the forwarders see carriers continuing to charge premiums to importers that are under pressure to get time-sensitive cargo loaded onto vessels leaving Asian ports. Sur said those premiums are usually about $300 to $400 per container on top of the spot rate. “Those customers will get space if they pay the premiums,” he said.
Bennett added there is still a good deal of cargo for which time-to-market is crucial. “The [time-sensitive] programs we run now are hot. There’s pressure to get it here.” Bennett said strong housing sales in a number of markets are driving imports of furniture and housewares.
East Coast-West Coast spread narrowing
The NVOs also noted the narrowing spread between West Coast rates and East Coast all-water rates as anomalous. During much of the year, the East Coast rate is about $1,000 higher than the West Coast rate, as all-water services carry shipments to the large consuming market on the Eastern seaboard without the added cost of intermodal rail from West Coast ports.
However, the spread has been narrowing considerably the past two months, and this week was down to $328 per FEU. That means carriers, at the request of customers, are shipping a large percentage of US import volume through the West Coast, especially the ports of Los Angeles and Long Beach, because of the faster transit times, the NVOs said. Trans-Pacific container services to the West Coast are 10 days to two weeks faster than those to the East Coast, and the West Coast routings give retailers the flexibility to delay their decision on final inland destinations until their shipments reach distribution centers in Southern California.
Both NVOs said they anticipate import volumes from Asia will remain strong at least through August, with Bennett saying he sees volumes remaining elevated through September.
The Global Port Tracker, published monthly by the National Retail Federation (NRF) with Hackett Associates, projects continued year-over-year declines in imports through November. October is likely to be the busiest month of the July–October peak shipping season, but it will still be the lowest volume of imports for a peak-season month since September 2014, according to Global Port Tracker.