Container freight rates from Asia to the US West Coast exceed USD 2,000/FEU

Container freight rates from Shanghai to the US West Coast have increased by 25% from the previous week to USD 2,097 / FEU, this is the first time this service has surpassed the USD 2,000 / FEU threshold this year, according to the Shanghai Containerized Freight Index (SCFI) was announced. Freight rates to the US East Coast also increased 7.4% during the week to USD 2,732 / FEU. The last time freight rates to the US West Coast reached USD 2,000 per FEU was on January 25, 2019.

Year-on-year, container shipping rates from Shanghai to the US West Coast increased by 42.6%, while freight rates to the US East Coast increased by 7.5%.

Jon Monroe, a consultant representing non-vessel-operating common carriers (NVOs) in the US and Asia, called this "temporary" spike in demand, spurred by retailers to additional inventory after several months has been fully distributed. "These are orders to bring inventory back to a certain level," Monroe told JOC.com.

David Bennett, president of America for Globe Express Services, said he felt consumer demand was really beginning to rise. “I’m looking into July. There’s a lot of cargo in the pipeline,” he said.

Balance transport capacity

Monroe and Bennett told JOC.com on Friday that they believed carriers underestimated the volume of U.S. imports in May and cut capacity by canceling large numbers of sailings. more than guaranteed.

A representative of an unnamed shipping line said that in terms of the number of canceled sailings, carriers had honest estimates of the volume of U.S. imports from Asia they believed would occur in the period May and June.

Container lines usually notify customers three to five weeks in advance of canceled sailings. When they made predictions based on import volumes in March and April, the data they obtained showed that US imports from Asia were down 1.7% from the previous year, after a sharp decline. 17.4% in March 2019, according to PIERS.

When import volumes are weak, carriers try to prevent their financial losses by balancing transport productivity with expected demand. “The only thing carriers can do is to control their costs”, the carrier's representative said.

Typically, imports for the back-to-school season increase in May and June because retailers want the goods to ship after July 4. Due to the Corona 2019 virus outbreak (COVID-19), schools in many parts of the country are only just now announcing reopening plans for the fall, so purchase orders for back-to-school merchandise are running behind schedule.

According to consulting firm Drewry, carriers over the past two months have reduced capacity from Asia to the US East Coast by 10% and 19% for the West Coast. Because the reduction in capacity to the West coast is almost double that of the East Coast, the difference between the two prices dropped to only USD 635/FEU last week (normally the difference is about USD 1,000/FEU due to time longer shipping).

How long freight rates remain depends largely on the needs of consumers. There are two schools of thought about how long the current production will increase. With the number of unemployed due to COVID-19 now exceeding 40 million and a number of large retailers applying for bankruptcy protection or withdrawing from shopping centers, the prospect for an increase in consumer demand is increasing. Use during the summer peak season seems faint, says Monroe.

Bennett, meanwhile, said that the number of people coming to shopping centers is increasing at locations that reopened in early May and he believes that increased consumer demand will be maintained.

Phaata (Source JOC)

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