November draws nigh, the leaves are turning rust and yellow, and there’s still not a rustle of normal peak-season rate strength in the trans-Pacific Asia-to-U.S. container trade. When is it safe to call this peak season a bust? Answer: That time has probably already passed.
A key indicator of demand, assuming no major changes in vessel capacity, is the price paid to ship a container. Freightos provides indices that track the daily change in the cost to ship a 40-foot-equivalent unit (FEU) box on various trade lanes around the world.
The Freightos index that covers the China-to-North America West Coast route (SONAR: FBXD.CNAW) is down 47% year-on-year. The index that covers Chinese shipments to the U.S. East Coast via the Panama Canal (SONAR: FBXD.CNAE) is down 20%.
Drewry tracks weekly container pricing. Its index for boxes from Shanghai to Los Angeles (SONAR: WCI.SHALAX) is down 49% year-on-year, and its index for transport from Shanghai to New York (SONAR: WCI.SHANYC) is down 30%.
One could argue the comparisons are skewed because at this time last year, American importers were racing to bring in cargoes early to beat pending tariffs by President Trump.
But trans-Pacific container shipping prices have now bounced along the bottom for seven months. The Freightos trans-Pacific indices are now at the same level they were in early April, and the Drewry indices are on par with where they were in mid-March. Logically, either (a) so much cargo was brought forward in the second half of 2018 that it “borrowed” volume from both the first half of this year and the current peak season, (b) there’s less demand, and/or (c) there’s more vessel supply.
Freightos Chief Marketing Officer Eytan Buchman highlighted the positives in a commentary published on Oct. 24. He noted that China-West Coast rates, while significantly down versus 2018 levels, are still up 4% versus 2017. He added that China-East Coast prices actually rose $100/FEU over the past week, the largest weekly gain since September, and that rates to the East Coast may be down versus last year, but they’re up 53% versus 2017.
“Based on FBX [Freightos Baltic Index] historical data, a core indicator of peak season is mid-month rate increases that do not drop during the rest of the month,” he explained. “China-West Coast prices are 3% higher than early October, which seems to indicate the potential for a significant early November GRI [general rate increase].
“The first week of November was when prices peaked for the season last year, driven by holiday sale stocking and a looming China trade tariff change,” Buchman noted. “The same conditions apply this year, with importers having had plenty of lead time to front load before the Dec. 15 tariff change.
“While November should see a rate increase, it will likely still be far from sufficient to close the gap between 2019 and 2018 trans-Pacific pricing,” he acknowledged. More FreightWaves/American Shipper articles by Greg Miller
Editor’s note: Freightos has a business agreement with FreightWaves that includes editorial coverage.