[Freightos Weekly Update] Transpac and Asia - Europe ocean rates slide, as carriers start to reduce capacity.

Key insights:

1 Transpacific ocean rates continued to decline this week, though congestion at East Coast ports may explain the slower slide for prices from Asia to the East Coast and Gulf compared to the West Coast where congestion is easing.

2 This decrease reflects falling demand for freight as inflation reduces spending among some consumers, as consumers shift to other types of goods and to services as the pandemic recedes, and as many retailers pulled peak season orders earlier in the year to avoid delays.

3 Asia – N. Europe ocean rates also fell this week – after being quite stable from May through early August – as demand and volumes decrease on this lane. Ocean carriers are canceling sailings in response.

4 Freightos Air Index transpacific rates are decreasing at a time they were already starting to climb last year. At $5.28/kg, last week’s average is also about 50% lower than last year, and some carriers are already projecting a slow peak season in air cargo as well.

Asia-US rates:

• Asia-US West Coast prices (FBX01 Daily) fell 20% to $4,345/FEU. This rate is 79% lower than the same time last year.

• Asia-US East Coast prices (FBX03 Daily) decreased 4% to $8,688/FEU, and are 61% lower than rates for this week last year.

Analysis

Transpacific ocean rates continued their decline this week, with Asia - US West Coast prices decreasing 20% to start the month at $4,345/FEU – a rate 70% lower than at the start of the year and last seen back in January 2021.

This decrease reflects falling demand for freight, both because of excess inventories among some importers as inflation reduces spending among some consumers and others shift to other types of goods and to services as the pandemic recedes, and because many retailers pulled peak season orders earlier in the year to avoid delays.

At the same time, easing backlogs and congestion at LA/Long Beach are keeping more vessels moving as opposed to sitting in the bay, increasing available capacity and also pushing rates down on this lane. Much of that congestion, however, has shifted to East Coast and Gulf ports and is likely a factor keeping Asia - US East Coast rates from falling as dramatically as rates to the West Coast.

Asia – N. Europe rates also fell sharply this week and at $7,845/FEU are now about 25% lower than the level held from May to early August. As volumes on this lane continue to slump, carriers have begun to blank sailings in an attempt to keep ships full.

But despite these decreases, ocean prices are still well above the norm: transpacific rates are about triple their level in September 2019 and Asia – N. Europe prices are five times as high. So even with falling demand, other factors like congestion, still-strong (relative to 2019) projected transpacific volumes, and unresolved labor disputes in the US and UK – not to mention potential zero-covid, weather, and energy disruptions – could keep the slide gradual.

Though we aren’t in the typical air cargo peak season yet, Freightos Air Index transpacific rates are decreasing at a time they were already starting to climb last year. At $5.28/kg, last week’s average is also about 50% lower than last year, and some carriers are already projecting a slow peak season in air cargo as well.