Strong peak demand pumps trans-Pac box rates

On the trans-Pacific, East Coast rates have been stable at their peak level of about $9,000/FEU since early July, Levine said. “West Coast rates reached a peak of more than $7,500/FEU in early July and through last week had eased about 20% to around $6,000/FEU. 

But West Coast daily rates so far this week have jumped back above $7,000/FEU on August 1 GRIs.”

Levine noted that the National Retail Federation estimated that demand in August would be well below July levels. “But steady East Coast rates together with some forwarder reports of surprisingly strong demand and this recent West Coast rate bump may indicate that peak season strength is lasting longer than anticipated on the trans-Pacific.”

Other analysts cite unexpectedly low inventory levels and stronger than anticipated consumer demand for helping push up rates.

“Another reason may be that the July 24 tariff deadline did not result in sharp tariff hikes,” said Levine. “Many U.S. shippers were frontloading peak season volumes ahead of the Section 122, 10% global tariff July 24 expiration date out of concern that duties could be higher soon after.

“Instead, Section 122 tariffs were immediately replaced by Section 301 tariffs on more than 60 trade partners, aimed at curbing forced labor imports, of 10% to 12.5% or about even with the expiring duties.”

Duties could return to emergency tariff levels as the U.S. Trade Representative is nearing completion of its Section 301 investigation into excess manufacturing capacity by 16 of the largest U.S. trading partners. 

“But even once the USTR shares its findings, it will take several weeks before the president could implement the recommendations,” Levine said. “This gap may be extending tariff frontloading by some shippers, likewise contributing to a longer than expected trans-Pacific peak.”

The Asia-Europe trades may also be facing upward pressure from supply side constraints, he said. Two major typhoons struck Far East ports over the last few weeks, and maritime hubs are still recovering.

“Some carriers are now skipping Shanghai port calls as congestion remains severe there, with multi-day delays also reported in Ningbo, Shenzhen and Hong Kong,” said Levine. 

Read more articles by Stuart Chirls here.

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