China’s recent military exercises – which are meant to continue this week – have yet to significantly disrupt ocean freight operations, though a prolonged version certainly could, according to Freightos.
The Port of Kaohsiung is one of the top 20 largest container ports in the world by volume and the area harbors one of the busiest waterways in the world handling significant traffic heading to Europe and the U.S. from East Asia.
A sustained conflict could force vessels to take alternative routes, adding transit time, disrupting schedules and contributing to congestion that is already helping to keep ocean spot rates extremely elevated despite recent decreases.
Transpacific ocean rates fell more than 6 percent to both coasts this week. And though Asia – U.S. West Coast rates have decreased 16 percent since early July, the pace of the decline has slowed when compared to the 50 percent drop over May and June. Despite being firmly in the typical peak season months, many in the industry are not expecting a coming increase in rates or volumes on the transpacific or for Asia – Europe trade, though rates are expected to stay well above pre-pandemic levels.
National Retail Federation data for U.S. ocean imports indicate that volumes peaked and set a monthly record in May. June volumes were 6 percent lower compared to May, and July’s imports are projected to be about even with June before volumes gradually decline through October with monthly totals slightly below last year’s. But despite this expected decline, each of the coming three months would still be 12-15 percent higher than in 2019.
There are also indications of slowing consumer demand, though even inflation-adjusted spending likewise remains higher than in 2019.
Taken together, these trends suggest that most of ocean freight peak season was pulled forward to spring this year. Combined with some decrease in demand driven by inflation and changes in consumer spending, it also looks like the shift toward normalization has started, but will be gradual as demand remains strong and congestion continues to strain capacity.
Key insights:
- China’s military exercises continue, though there have been no major disruptions to ocean or air operations yet. A continued conflict could contribute to delays and congestion at destination ports as container vessels would seek alternative routes.
- Transpacific ocean rates continued their gradual decline, and the latest import projections likewise suggest a moderate decrease through October though both rates and volumes are expected to remain well above 2019 levels.
- Together with signs of changes in consumer spending, these trends suggest that most of ocean freight peak season was pulled forward to spring this year, and that the shift toward normalization has started – but will be gradual as demand remains strong and congestion continues to strain capacity.
Asia-US rates:
- Asia-US West Coast prices (FBX01 Daily) fell 7% to $6,238/FEU. This rate is 61% lower than the same time last year.
- Asia-US East Coast prices (FBX03 Daily) decreased 6% to $9,361/FEU, and are 47% lower than rates for this week last year.
