[Freightos Weekly Update] No sign of peak season bump yet, as transpac rates continue to slide

Key insights:

1. With more signs of slowing consumer demand, transpacific ocean rates fell 2% this week. 
2. China - US West Coast shipments now cost about half what they did in April and are more than 30% lower than this time last July when prices were beginning their 80% peak season spike over the course of the month.
3. Ocean carriers have canceled sailings in May and June in response, though fewer are planned for late July, possibly in anticipation of some peak season surge nonetheless. 
4. In air cargo, the recovery of belly capacity continues on many lanes, with Freightos Air Index Europe - N. America rates now $3.80/kg, 25% lower than in early May. 

Asia-US rates:

• Asia-US West Coast prices (FBX01 Daily) fell 2% to $7,425/FEU. This rate is 31% lower than the same time last year.
• Asia-US East Coast prices (FBX03 Daily) dipped 2% as well to $9,872/FEU, and are 29% lower than rates for this week last year.

Analysis

More signs of slowing consumer demand surfaced this week with reports of manufacturing and new orders slowing and of US retail spending unexpectedly dipping slightly in May.

Falling ocean container rates, especially on the transpacific, suggest that capacity continues to exceed demand.  Asia – N. America rates fell 2% this week, with West Coast shipments now costing about half what they did in April.  These rates are more than 30% lower than this time last July when prices were beginning their 80% peak season spike over the course of the month.

Prices have fallen even as carriers have increased the number of blank sailings in May and June to try and match capacity to falling demand. So far there are fewer canceled voyages planned for later this month, suggesting that, at least for now, carriers are anticipating an increase of activity deeper into peak season.

Volumes from Asia to Europe have already fallen on an inflation-driven decrease in demand. And though prices have dropped more than 25% since the start of the year, port congestion – which is only getting worse –  is nonetheless keeping rates well above the norm.  Any peak season increase in volumes would only make things worse.

An increase in traffic to the US could also be challenging as East Coast ports struggle with worsening congestion. Though operations have improved at LA/Long Beach, congestion is still a problem there too, with a growing backlog of containers waiting to be moved by rail. 

Despite calls from major retailers to extend the existing West Coast labor contract, the ILWU’s agreement expired at the end of last week making a strike a legal option, and another threat to operations. But both sides of the table continue to be optimistic that a deal will be reached without disruptions.  

In air cargo, the recovery of belly capacity continues on many lanes, with Freightos Air Index Europe - N. America rates now $3.80/kg, 25% lower than in early May. A ground handling shortage in Frankfurt, meanwhile, is causing freighter cancellations, and could put upward pressure on costs through the hub.