Recent reports show a 3% reduction in global ocean volumes in May compared to last year, and estimate that transpacific container vessels sailed less than 90% full – the level key to keeping rates high or climbing – for the first time since mid-2020, according to cargo marketplace Freightos. Asia – Europe vessels had utilization levels of about 80%.
Though rates were stable this week, the extra available space has, especially from China to the US, pushed prices down significantly since early May. Transpacific capacity data from Windward suggest that rates started falling in May as capacity remained about level with March, but fell 29% in June even when capacity may have started decreasing. Recent reports of an increase in blank sailings may explain the recent leveling off, as rates have fallen only about 4% so far in July.
Nonetheless, the latest National Retail Federation data show US container import volumes set a new record in May and are projected to decline but remain strong through the end of peak season. July imports are projected to be just 4% below the May record. August will be an estimated 6% lower than May and mark the first annual decline since July 2020. With signs of decreasing demand and significant front loading of peak season orders already, the NRF projects a sharper drop in September and October.
But volumes, like rates, are falling from an extremely high starting point. So even with these projected decreases, these monthly peak season volumes would still be 13% to 15% higher than in 2019, suggesting that even with some cooling, the freight peak season could be very busy.
Falling consumer demand is meant to kick off the process of unwinding the congestion that has caused delays and contributed to elevated freight rates. But the decrease in demand has meant an unexpected increase in inventories. With shelves and warehouses full, this drop in demand, for now, may be making congestion worse as imports with no place to go sit for extended periods on port container yards or at rail hubs.
Which is to say that the unwinding process – for both congestion and rates – could be a slow one.
- Ocean rates were level overall this week, as carriers are reportedly reducing capacity to meet falling demand. Excess available space had Asia – US West Coast rates fall 29% in June, while prices have decreased only 4% so far in July.
- The National Retail Federation reported a record number of import containers in May, but projects declining volumes for July to October, marking the first year-on-year declines since July 2020.
- But volumes, like rates, are falling from an extremely high starting point, meaning monthly peak season volumes would still be 13% to 15% higher than in 2019, suggesting that peak season could still be very busy.
- Falling demand is meant to signal the beginning of the end for port congestion, but it is also causing an unexpected increase in inventories, which, for now, may be making congestion worse as imports with no place to go clog up port and rail yards.