Freightos Weekly Update: Sub-$1k transpac rates among the signs rebound isn’t here yet

Key insights:

1. Asia - US West Coast daily ocean rates dipped to $990/FEU yesterday, a new FBX low for this lane.

2. Conventional wisdom is that once excess inventories run down – and if consumer demand is there – the industry will enter a restocking cycle and ocean demand and rates will climb. Some recent projections had that rebound to above 2019 volumes set to begin already in March.

3. But falling rates through March and into April, increases in announced blanked sailings for the coming weeks, and contract negotiations still up in the air given the still-slumping spot market, may signal growing skepticism that any rebound has already begun or will kick in very soon.

• Asia-US West Coast prices (FBX01 Weekly) fell 1% to $1,006/FEU. This rate is 94% lower than the same time last year.

• Asia-US East Coast prices (FBX03 Weekly) decreased 1% to $2,097/FEU, and are 88% lower than rates for this week last year.

• Asia-N. Europe prices (FBX11 Weekly) increased 1% to $1,344/FEU, and are 89% lower than rates for this week last year.

Analysis

Ex-Asia ocean rates were level this week, with last week’s average to the West Coast at $1,006/FEU. But daily rates this week have now dipped just below the $1k mark to a new FBX low for this lane. Transatlantic prices fell 3% to $3,771/FEU, a 54% drop compared to a year ago though still double 2019 levels.

Transpacific volumes and rates are down both because of a slowdown in pandemic-driven spending on goods and because many importers pulled too many orders forward into H1 of last year – to keep up with expected consumer demand and account for delays – and have been working down those inventories since.

Conventional wisdom is that once inventories run down – and if consumer demand is there – the industry will enter a restocking cycle and ocean demand and rates will climb. Some recent projections had that rebound to above 2019 volumes set to begin already in March.

But falling rates through March and into April, increases in announced blanked sailings for the coming weeks, and contract negotiations still up in the air given the still-slumping spot market, may signal growing skepticism that any rebound has already begun or will kick in very soon.

Importers not dealing with excess inventories are also facing uncertainty around what consumer demand will look like for the rest of the year, making some cautious in placing new orders. This caution and the desire for cost savings are among the drivers of the decline in air volumes and rates as some importers both order less and ship a higher than normal share of their volumes earlier than usual – but by ocean instead of air.