Freightos Weekly Update

Key insights:

1. Trump’s victory in the US presidential election yesterday may start impacting the ocean freight market even before his January inauguration. The announcement of new tariffs in 2018 caused an increase in ocean volumes and rates to double ahead of their 2019 roll out. The expectation of even sharper tariff increases after Trump takes office could push some importers to already start frontloading now.

2. Transpacific ocean rates of about $5,200/FEU are well below peak season highs, but are still thousands above normal due to the continued Red Sea crisis, and possibly also to some frontloading ahead of another ILA strike possible in January.

3. Port workers in Prince Rupert and Vancouver have been locked out since the start of the week in response to their strike announcement. Several vessels are currently stuck, with others scheduled to arrive soon. Meanwhile, a union strike in Montreal is impacting 40% of the port’s capacity as this ongoing dispute escalates.

4. Asia -Europe ocean rates increased last week on start of month GRIs as carriers seek a price rebound especially as annual contract season gets underway on this lane.

5. Carriers will be hoping continued congestion in Hamburg, delays in East Asia from a recent typhoon, and an increase in blanked sailings may support this rate hike even as demand eases. An early Lunar New Year and longer lead times due to Red Sea diversions could also work in carriers’ favor.

1. China - N. America air cargo rates of $7.00/kg for the last couple weeks – the high for last year – suggests that air peak season is upon us for this lane.

2. B2C e-commerce imports – a big driver of air volumes and rates this year – face a new challenge as the European Commission investigates Temu for the sale of illegal goods. In the US, increases in warehouse leasing by Chinese logistics companies may signal some platforms are preparing for a shift away from de minimis and air cargo.

Ocean rates - Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) fell 2% to $5,403/FEU.

• Asia-US East Coast prices (FBX03 Weekly) increased 1% to $5,219/FEU.

• Asia-N. Europe prices (FBX11 Weekly) climbed 5% to $3,655/FEU.

• Asia-Mediterranean prices (FBX13 Weekly) increased 2% to $3,504/FEU.

Air rates - Freightos Air index

• China - N. America weekly prices decreased 3% to $6.70/kg

• China - N. Europe weekly prices increased 2% to $3.94/kg.

• N. Europe - N. America weekly prices increased 11% to $2.24/kg.

Analysis

Trump’s victory in the US presidential election yesterday may start impacting the ocean freight market even before his January inauguration.

During the recent campaign Trump proposed applying across the board tariffs of 10% to 20% on most of the $3 trillion worth of annual US imports, and a minimum 60% tariff on all imports from China. In 2018, Trump’s announcement of tariff increases led to a significant pull forward of ocean imports as shippers rushed to bring in goods before the tariff increases went into effect in early 2019. Freightos Baltic Index data showed that transpacific container rates doubled from July to November in 2018 as ocean volumes and inventories grew, with rates and volumes in 2019 muted in comparison.

This time, anticipation that Trump will follow through on these campaign promises could be enough to spur some increase in ocean freight demand and rates starting now, with these trends possibly intensifying once tariff increases are actually announced.

You can read our recent analysis of tariff impacts on freight markets here.

If pressure is renewed on the US ocean freight rates due to the election, it will be starting from an already elevated floor. Though prices have fallen significantly as peak season demand pressure has eased – transpacific rates to the East Coast are nearly 50% lower than their July high – at about $5,200/FEU East Coast prices are more than double their level last year, and West Coast prices are more than triple what they were last year and in October 2019. Rates are also $1,000 - $2,000/FEU higher than their lower for the year reached this April.

The root cause of elevated rates across the container market is the Red Sea crisis which continues to absorb capacity. But there may be other factors at play unique to the N. American market, keeping more pressure on rates compared to other tradelanes.

The first could be some pull forward of volumes in the last couple months by shippers in anticipation of a possible Trump victory – a trend that could intensify now that the election is over. The other is the looming January 15th deadline for a possible renewal of the port worker strike at East Coast and Gulf ports. This last factor could also be contributing to transatlantic spot rates which climbed to $2,583/FEU last week, 35% higher than a month ago, and at its highest level since May 2023.

Also in North America, port operators in Prince Rupert and Vancouver – Canada’s largest container port – have locked out ILWU workers since the start of the week in response to the union’s strike announcement. Several vessels are currently stuck at the ports waiting out the strike, with others scheduled to arrive soon. Disruptions at these hubs could lead to diversions and increased traffic at Seattle - Tacoma. Meanwhile, port workers in Montreal have ceased operations at two of the port’s terminals, impacting 40% of the port’s capacity as the newest escalation in this ongoing dispute.

Asia -Europe ocean rates – which had returned to April levels – increased last week on start of month GRIs as carriers seek a price rebound especially as annual contract season gets underway on this lane.

The latest daily rates of more than $4,500/FEU are more than 20% higher to last week’s levels. Carriers will be hoping some continued congestion in Hamburg, 2-3 day waits in Taiwan ports, Shanghai and Ningbo due to last weekend’s typhoon, and an increase in blanked sailings may support this rate hike even as demand eases post-peak season. An early Lunar New Year and longer lead times needed ahead of the holiday due to Red Sea diversions could also work in carriers’ favor.

Conventional wisdom since the start of the Red Sea crisis has been that once it ends, overcapacity in the market will take hold to push rates down, possibly to extreme lows. In a recent earnings call though, Maersk – which also said it will take about three months to get its new alliance with Hapag- Lloyd up and running smoothly after its launch in February – speculated that demand growth, slow steaming, and a significant increase in scrapping older vessels, could blunt the impact of fleet growth and keep rates profitable for carriers.

In air cargo, China - N. America rates of around $7.00/kg for the last couple weeks – the high for last year – suggests that air peak season is upon us for this lane, though prices to Europe have stayed level just below $4.00/kg, still below the $4.80/kg high reached last December.

The elevated starting point for air rates is due to the surge of B2C e-commerce volumes that have kept capacity tight for much of the year. But challenges to this flood of low cost imports continue to mount.

Besides the Biden administration’s proposed closing of the de minimis exemption to most Chinese imports – which may be unlikely to happen before the end of its term, though the Trump administration could feasibly try to enact something similar – the European Commission has opened an investigation into Temu’s possible failure to limit the sale of illegal goods. In the US, increases in warehouse leasing by Chinese logistics companies, including for e-commerce, may signal that some platforms are preparing for a shift away from de minimis and air cargo.