[Freightos Weekly Update] Transpac ocean rates climbing on China-US rebound

Key insights:

1. The clock is ticking for the US’s reciprocal tariff pause which ends July 9th and the China-US deescalation that expires August 14th. The US has so far only come to (tentative) trade terms with the UK. President Trump is skeptical deals with most countries will be settled before July, and said that the US may just unilaterally apply tariffs instead, possibly in the coming weeks.

2. It’s also still unclear if goods need to arrive in the US by the deadlines to avoid renewed tariffs – which would mean a significantly shorter window to move goods – or just need to be loaded at origins before the pauses expire.

3. The China-US deescalation is driving a big bump in China-US ocean demand with carriers announcing rate increases that would push transpacific container prices to the West Coast up to the $8,000/FEU level by mid-June if successful. Rates to the East Coast have already climbed $1,000/FEU to $4,400/FEU so far this week.

4. As demand rebounds, carriers are rushing to restore sailings and services cancelled during the April lull. But many transpacific vessels and containers were shifted to other lanes in the interim and are now out of position, leading to some capacity and equipment shortages in China – with congestion and delays also already building at some Chinese ports – as bookings pick back up.

5. While some observers think – despite the current rebound – frontloading to date and 30% tariffs will be enough to deter or prevent an unbroken transpacific volume surge from now till August, others think the deescalation is already spurring an early and strong peak season that will keep demand and rates elevated in the coming months.

6. Asia-Europe’s ocean peak season started earlier than usual last year as shippers adapted to longer, Red Sea-diverted voyages by starting peak season in May. But despite Red Sea diversions still in place, Asia - Europe demand has yet to pick up.

7. Even with significant congestion at many European hubs, rates have languished as capacity on the lane continues to grow, though carriers will try a $1,000/FEU GRI in June. Reports that carriers are shifting some Asia-Europe capacity to the transpacific could help push rates up next month.

8. A significant amount of freighter capacity has left the transpacific air cargo market since the US suspended de minimis eligibility for Chinese goods. With this shift concentrated in the chartered freighter market though, China-US spot rates have stayed elevated for now. That freighter capacity may be moving to other lanes, which could impact rate levels in those markets.

Ocean rates - Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) increased 3% to $2,462/FEU.

• Asia-US East Coast prices (FBX03 Weekly) increased 3% to $3,520/FEU.

• Asia-N. Europe prices (FBX11 Weekly) increased 3% to $2,459/FEU.

• Asia-Mediterranean prices (FBX13 Weekly) increased 1% to $2,979/FEU.

Air rates - Freightos Air index

• China - N. America weekly prices increased 4% to $5.50/kg.

• China - N. Europe weekly prices increased 1% to $3.53/kg.

• N. Europe - N. America weekly prices fell 1% to $1.88/kg.

Analysis

The clock has started for the China-US tariff deescalation that expires August 14th. It is ticking even faster for US importers sourcing from a long list of US trading partners for whom a reciprocal tariff pause – likewise initiated to allow time for trade deal negotiations – will end on July 9th.

So far though, only the UK has come to a tentative deal with the US, with the US’s insistence on keeping its 25% auto tariff in place reportedly a sticking point in negotiations with the EU, S. Korea and Japan. President Trump recently said he doesn’t expect to come to agreements with all of these countries in time and will therefore likely unilaterally apply tariffs instead, though it is unclear if those levies will be back to the levels announced in April or not.

And to complicate matters further, it is also unclear if those July and August deadlines mean goods need to be loaded at origins by those dates – as was the case with the April 9th tariff deadline – or that goods must arrive in the US by then. The latter would significantly shorten these lower-tariff windows. Ocean shipments from the Far East would have to move in the next week or two to arrive before July 9th.

The May 12th China-US deescalation is driving a big bump in China-US ocean demand after a significant drop in volumes since the US’s 145% tariffs on China took effect in early April.

In response, carriers are introducing mid-month GRIs of $1,000 - $3,000/FEU with similar increases planned for June 1st and 15th, aiming to push rates up to as high as $8,000/FEU in the next few weeks. If successful, rate levels would be about on part with the Asia - US West Coast 2024 high reached last July. Daily transpacific rates as of Monday have already increased about $1,000/FEU to the East Coast and $400/FEU to the West Coast to about $4,400/FEU and $2,800/FEU respectively.

As demand rebounds, carriers are rushing to restore blanked sailings and suspended services cancelled during the April lull. But many transpacific vessels and containers were shifted to other lanes in the interim and are now out of position, leading to some capacity and equipment shortages in China as bookings pick back up.

This tight capacity is also contributing – together with congestion and delays of several days at some Chinese container hubs resulting from the increase in demand as well as some bad weather – to climbing container prices. Given the approaching deadlines, we may also see stronger demand and more upward pressure on rates to the West Coast than to the East Coast as shippers opt for shorter transit times.

With so much ocean freight already frontloaded in the past six months and the 30% minimum China tariff still a substantial cost hike for US importers, some experts think demand and rates will rebound but not surge ahead of the August deadline – even if this week does mark an early start to this year’s peak season that may end earlier than usual as well.

Meanwhile, Jonathan Gold, VP of Supply Chain at the National Retail Federation, told us in our update webinar yesterday that he thinks importers will resume with significant frontloading both out of concern that tariffs on China could climb higher again and because many seasonal goods just couldn’t be ordered and moved yet – meaning that peak season has started and could be a strong one into August.

By this time last year, Asia-Europe’s ocean peak season had already started as shippers tried to adapt to longer, Red Sea-diverted voyages by placing their peak season orders a couple months early. But despite Red Sea diversions still in place, Asia - Europe demand has yet to pick up this time around.

In any case, carriers have announced GRIs for June that aim to push rates up to around $3,200/FEU to Europe and $4,500/FEU to the Mediterranean for around a $1,000/FEU gain – significantly lower than the $6,000 - $7,000/FEU level seen last June. This disparity may reflect the significant challenge that capacity growth is posing for carriers on this lane. The significant congestion that has persisted at many European hubs for weeks now has not supported rate increases yet, though reports that some Asia-Europe capacity is now shifting to the transpacific could help reduce capacity and push these GRIs through.

A significant amount of freighter capacity has left the transpacific air cargo market since the US suspended de minimis eligibility for Chinese goods and e-commerce volumes moving by air cargo on this lane have dropped. With this shift concentrated in the chartered freighter market though, spot rates have for now remained elevated. Freightos Air Index China-US rates of $5.50/kg last week were level with early April prices. That formerly transpacific freighter capacity may be starting to move to other lanes though, which could start impacting rate levels for these markets as well.”