Drewry Shipping Consultants says that if container carriers “refrain from returning too much capacity, there is a reasonable hope for higher freight rates as we approach Black Friday (Nov. 29) and Christmas sales.”
Simon Heaney, senior manager for container research at Drewry, says Christmas merchandise will continue to arrive in the U.S. in coming weeks and that transpacific volumes could also benefit from shipments being made in advance of factories shutting down for Chinese New Year, which arrives Jan. 25, 2020, compared with Feb. 5 in 2019 and Feb. 16 in 2018.
In the latest issue of its Container Insight Weekly newsletter, Drewry says it “sees reasons to believe that stronger growth will return in the not too distant future. The transpacific has thus far managed to avoid significant contraction thanks to a combination of factors, including a weakening of the Chinese currency, willingness from some Chinese exporters and American importers to absorb some of the additional costs arising from the new tariffs and some trade substitution within Asia. Countries such as Vietnam, Taiwan, Thailand, and Malaysia have all stepped up trade with the US to counter lost Chinese exports.
“Ultimately, what gives us confidence in the longer-term prospects for the transpacific is the underlying strength of the US economy that hasn’t been derailed by the Washington and Beijing shenanigans and has continued to create jobs and raise incomes throughout.”
Higher volumes and rates would be welcome news for the liner industry. As reported by FreightWaves, transpacific freight rates are far below where they were a year ago.
Drewry’s own World Container Index, indicated that on Oct. 24, spot container rates were 47% lower from Shanghai to Los Angeles and 28% lower from Shanghai to New York than they were at the same time in 2018.
In the first eight months of 2019, loaded traffic from Asia to the West Coast of the U.S., Canada and Mexico is off 3%, but a 6% increase in the smaller trade from Asia to the East Coast of North America means container imports from Asia have essentially been the same as in 2018. Drewry says that trend continued in September, with U.S.-only data from PIERS showing shipments from Asia to the U.S. West Coast falling by 5.8%, but those to the East and Gulf coasts rising 6.9%.
Next year, Drewry projects eastbound transpacific volumes will grow 3.2%, compared with 2.3% growth from Asia to North Europe and about the same as the 3.2% growth it forecasts for the Asia-Mediterranean trade.
The US-China trade war boosted transpacific volumes in late 2018, as shippers scurried to move product into the U.S. before threatened tariffs went into effect. So this year, volumes were “always likely to regress, but the extent to which growth has contracted has forced lines to recalibrate their products,” Drewry said.
Drewry’s newsletter notes carriers have tried to prop up rates through capacity reductions, with September’s headhaul slots reduced by around 2% from the same month in 2018.
“The impact of numerous blanked sailings was to drive up average load factors above 90% from June onwards, but the market didn’t bite at these artificial supply maneuvers as spot freight rates have stubbornly stuck around the $1,500/40ft container level since February,” it says. (Drewry’s World Container Index shows the spot rate from Shanghai to Los Angeles was even lower on Oct. 23 — $1,402 per 40-foot container.)
Heaney notes that only about a quarter of transpacific cargo moves at spot rates, the rest under contracts. While some contracts start at the beginning of the calendar year, more typically, transpacific cargo is contracted during a year that runs from May 1 through April 30. To have an impact on contract rates, he said, spot rates will have to remain high until contract negotiations are well under way, about two months before May.
Noble1
What sort of journalism is this ? If ? May ? Could ?
You don’t know what you’re taking about and you’re just assuming !
NEXT !
In my humble opinion …………
Malak
hi