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Trans-Pacific spot rates cool as new capacity tempers overheated market

By Bill Mongelluzzo

Spot ocean rates for Asia to the US West Coast appear to have peaked after edging lower over the past week , forwarders and carriers say , reflecting the capacity recently injected on the trade to handle what US retailers are calling their strongest volumes in two years .

After climbing steadily since May 1 amid twicemonthly general rate increases ( GRIs ), forwarders expect the rate decline to accelerate in the coming weeks after carriers launched or reinstated 10 services into the eastbound trans-Pacific .

“ It was almost a change overnight in the market dynamics .”

“ It was almost a change overnight in the market dynamics ,” a carrier executive told the Journal of Commerce . “ The turning point was the first week in July .”

The Journal of Commerce spoke to six non-vessel-operating common carriers ( NVOs ), two carriers , two importers and an industry consultant for this story .

Average Asia – West Coast spot rates crept down to

Asia – USWC spot rates slip after two-month bull run

Container spot rates from North Asia to US West and East coasts , in USD per FEU

USD per FEU

$ 10,000

$ 8,000

$ $ 10,000 6,000

$ 4,000

$ 2,000

$ 0

Source : Platts , S & P Global

L Jan 2023 Jul Jan 2024 Jul

North Asia to US East Coast North Asia to US West Coast

© 2024 S & P Global

L

$ 7,800 per FEU in the week of July 12 from $ 8,133 per FEU the previous week , according to Platts , a sister company of the Journal of Commerce within S & P Global .

“ We ’ re getting notifications of [ rate ] reductions from some carriers ,” said Kurt McElroy , executive vice president of the NVO Kerry Apex .

Still , the current rate is nearly double the average rate of $ 4,000 per FEU level on May 1 .

While capacity utilization on services to the West Coast appears to be easing , vessel space from Asia to the US East Coast remains tight as retailers continue to front-load fall and year-end holiday shipments .

“ The peak season and Christmas cargo has moved way early this year ,” said James Caradonna , executive vice president of forwarder Spedag Americas Inc .

The carrier executive said he believes the front-loading to the East Coast will “ peak ” in August . That ’ s because with negotiations over a new contract between the International Longshoremen ’ s Association ( ILA ) and maritime employers on the East and Gulf coasts now stalled , importers will look to shift more cargo to the West Coast to avoid potential labor-related disruptions , the source said . The existing coastwide contract expires Sept . 30 .

Asia – East Coast spot rates averaged $ 10,100 per FEU in the week of July 12 , down from $ 10,133 per FEU the week before , according to Platts .

Supply injection

Total capacity from Asia to the West Coast this month is 1.68 million TEUs , almost 12 % higher than July 2023 , according to Sea-Intelligence Maritime Analysis . Carriers and carrier alliances have begun phasing in seven weekly services from China to Los Angeles-Long Beach . They also launched or reinstated three services to the Pacific Northwest ports of Seattle , Tacoma and Vancouver .

“ It seems like the added capacity is having an impact on rates ,” said Rachel Shames , vice president of pricing and procurement at the forwarder CV International .

A few carriers have begun quoting rates to the West Coast in the “ mid- $ 7,000s on select services ,” Shames said . A second carrier executive noted that the so-called bullet rates and extra-loader rates target specific routes or larger importers , so they will most likely not drag the entire trans-Pacific market lower .

“ The bullet and extra-loader rates tend to be localized ,” the source said . “ They ’ re not putting downward pressure on the FAK [ freight-all-kinds ] rates ,” which follow the larger spot market .

Although most carriers last month filed for GRIs of $ 1,000 that , if successful , would have gone into effect July 15 , it now looks almost certain that there will be no rate increase next week , said Christian Sur , executive vice president of ocean freight contract logistics at the forwarder Unique Logistics International .

“ We ’ ve gotten some slight reductions for the first time since May 1 ,” Sur said . Carriers now have enough capacity to absorb peak season volumes thanks to reduced congestion at Asian ports , deployment of extra-loader vessels and the new weekly services , he said .

With capacity constraints to the West Coast easing ,

16 Journal of Commerce | July 29 , 2024 www . joc . com