Meanwhile, ocean rates out of China, which have fallen significantly since March, remained level this week suggesting the potential surge of pent up volumes hasn’t materialized yet. Though Asia – U.S. West Coast rates are still about 6.5X their level in June 2019, they are now only 4 percent higher than this time last year, and Asia – N. Europe prices are now down year on year for the first time since mid-2020.
Any significant increase in container traffic out of Asia – either from Shanghai reopening or from the expected increase during peak season – would likely exacerbate the existing congestion and delays at destination ports, which in turn will put more pressure on rates.
Labor disputes – like the recently resolved trucker strike in South Korea – are another wrinkle threatening to make matters worse at some key hubs. But while members of a German port workers union stopped working for several hours last week in response to stalled negotiations, latest indications are that U.S. West Coast longshore workers and the Pacific Maritime Association will come to an agreement without strikes or lockouts.
Early this week the U.S. congress passed the Ocean Shipping Reform Act aimed at keeping U.S. exports moving even during times of peak imports, bringing equity to detention, demurrage and other surcharges, and strengthening the Federal Maritime Commission (FMC).
Though the new law includes little related to container rates, its passage was preceded by remarks from President Biden targeting ocean carriers for the extreme spike in logistics costs and their contribution to inflation. His speech prompted backlash from the carrier industry and others who point out that the FMC determined that spiking ocean rates are a result of market conditions and not of anti-competitive behavior.
Now on to this week’s international freight update.
- No surge of ocean volumes out of China have materialized yet, as new Covid cases in Shanghai threaten a renewed lockdown.
- This time last year ex-China ocean rates were already beginning to climb on peak season demand. Prices were stable this week but have fallen significantly since March, putting Asia – US West Coast rates only 4% higher than last year, and Asia – N. Europe prices down year on year for the first time since mid-2020.
- The US congress passed legislation this week aimed at keeping US exports moving, ensuring fair detention, demurrage and other surcharges, and strengthening the Federal Maritime Commission (FMC).
- The law includes little related to container rates, but ahead of its passage President Biden targeted ocean carriers for the extreme rate spikes and their contribution to inflation, prompting backlash including the fact that the FMC has determined that spiking rates are not the result of anti-competitive behavior.