The London-based shipping research and consulting firm is predicting imports from Asia to East Coast of North America ports will outpace those shipped to West Coast of North America ports in 2017.
Drewry expects containerized imports from Asia to East Coast of North America ports to grow at a faster rate than those arriving to the West Coast of North America in 2017.
In the wake of a sluggish first half in 2016, the Asia to East Coast of North America trade “is surging ahead in the highly competitive transpacific market,” the London-based shipping research and consulting firm said.
In its Container Insight Weekly newsletter, Drewry said, “The transpacific container trade is arguably the world’s most competitive deep-sea route with heightened competition between global, alliance card-holding carriers and smaller independent carriers, which are almost unseen in Asia-Europe.
“There is also intense rivalry from ports on every U.S. seaboard (not forgetting those in Canada and Mexico), all vying for the same Asian export cargoes.”
Drewry said container shipments from Asia to ports on the U.S., Canadian, and Mexican east coast saw their share rise from 24 percent in 2012 to 28 percent in 2015, but “that rising trend stalled last year as the share stood still.”
“In the battle between the West and East coasts, it was very much a game of two halves in 2016,” Drewry said. “The West easily won the first half with demand growth of 4 percent versus a trace increase to the East, but the latter triumphed in the second half as the mid-year expansion of the Panama Canal reignited the shift.
“Early year data suggests that the Asia-ECNA trade has carried that momentum into 2017.”
Citing statistics from PIERS, Drewry said January and February volumes from Asia to the U.S. East Coast rose by 4 percent to 760,000 TEUs, while U.S. Gulf Coast loads skyrocketed 32 percent to 82,000 TEUs.
In contrast, it said the U.S. West Coast, while still dominant, saw volumes decline 9 percent to 1.5 million TEUS.
“We haven’t seen February data for Canada or Mexico yet but we expect to see the arrows on our rolling 12-month chart point quite a bit higher for the ECNA trade than the WCNA route in 2017,” Drewry said.
“The impact of alliance restructure will not be immediately felt in the Asia to ECNA corridor, partly because the reaction from non-alliance rivals to changes in alliance services will not come into effect until mid-April,” Drewry added. “These include the resumption of Zim’s Z7S and the phasing in of bigger ships on the same carrier’s existing ZCP loop, which currently deploy units of about 5,000-TEU ships, but will add two 8,500-TEU and three 10,000-TEU ships to start with.
“Forward schedules indicate that the available eastbound capacity as of April 1 will be only 1 percent higher than it was in the same month last year,” Drewry said. “That figure might rise in the coming months, although last summer did see a significant increase in slots during the summer months as carriers positioned themselves ahead of enlarged Panama Canal opening.”
The strong growth in trade from Asia to the U.S. East Coast has been reflected in a widening gap between the price for moving a box to New York instead of Los Angeles, Drewry said.
At the end of March 2017, Drewry’s World Container Index showed “the premium on Shanghai to New York for 40-foot containers was $1,400 above the same from Shanghai to Los Angeles,” Drewry said. “At the same point last year, the gap was only $850 and narrowed to around $500-$600 in July before the Panama Canal expansion.
“It had been expected that the advent of larger ships on the all-water route would reduce the rate differential to make it a more attractive option compared to draying goods overland from the West coast,” Drewry said. “Instead, it appears that carriers are, for the time being, able to cash in on the route at the same time as making cost savings by introducing larger ships. Neither has the vessel upgrading process harmed eastbound ship utilization with our estimates suggesting that ships have been brimmed full in recent months.
“While ECNA trade managers will be happy to see the East coast premium rising once again, it remains a long way short of the $2,500 differential seen in 2015. There may well be a limit to how far they can push this before some shippers revert back to the West Coast,” said Drewry.
“Low-value, less time-sensitive goods such as furniture and clothing are more likely to switch to an East Coast routing, while just-in-time products such as car assembly components or high-value electrical goods, where transit time is more critical, are expected to remain moving over the West coast ports. A high freight differential may deter shippers of low-value goods that cannot bear the extra freight burden from making the switch.”
Drewry: East Coast ports are ‘winning the battle’
