International Maritime

Capacity boost pushes trans-Pacific carriers to jockey for cargo

By Bill Mongelluzzo

Trans-Pacific ocean carriers are offering more competitive prices than they were just a few weeks ago , with voyage- and commodity-specific rates undercutting listed spot and freight-all-kinds ( FAK ) rates , especially to the West Coast . These special rates — about $ 1,000 per FEU lower than the listed rate — come as Asia – US West Coast capacity exceeds current demand due to the 10 new or reinstated services deployed on the trade in recent months . “ There ’ s heated competition to the West Coast ,” Kurt McElroy , executive vice president of forwarder Kerry Apex , told the Journal of Commerce . “ There ’ s a proliferation of special rates that is accelerating .”

The average spot rate from North Asia to the US West Coast was $ 6,000 per FEU as of Aug . 23 , according to Platts , a sister product of the Journal of Commerce within S & P Global . But some lines are offering one-time “ bullet ” rates closer to $ 5,000 per FEU , as well as so-called blended rates or rates specific to a commodity or trade lane , according to Jon Monroe , a consultant who advises about two dozen non-vessel-operating common carriers ( NVOs ).

“ Those are the rates that are moving cargo ,” Monroe told the Journal of Commerce .

That ’ s an indication that capacity is beginning to loosen and carriers are competing aggressively to fill ships .

A carrier executive who asked not to be identified confirmed that the special rates he ’ s seeing are in the range that NVOs are quoting to their customers .

“ They ’ re not far off ,” the source said . “ Maybe they ’ re a little low .”

A second carrier executive said the general rate increases ( GRIs ) that most carriers announced in late August are helping to “ stabilize ” pricing . The GRIs did not push spot and FAK rates higher , though .

The executive emphasized , however , that not all shipments are moving at below-market rates . “ There ’ s still a great deal of space being filled in the $ 6,000s ,” he said .

Undercutting the market

Carriers announced GRIs as high as $ 1,000 per FEU effective Aug . 15 , but the increases did not stick , said Christian Sur , executive vice president of ocean freight and contract logistics at NVO Unique Logistics International .

Sur said he ’ s seen a number of “ blended rates ,” where every container shipped under contract rates — generally around $ 1,600 per FEU to the West Coast for mid-sized shippers and NVOs — is matched by a container shipped under the listed spot rate of about $ 6,000 per FEU . That lowers the effective rate of the containers shipped under the spot and FAK rates , he said .

There has also been a proliferation of “ commodity ” rates in recent weeks as space has opened up in the trans-Pacific , especially to the West Coast , McElroy said . Each carrier has core products on different trade lanes , such as furniture or automotive products from China or wood products from Indonesia . As space becomes more plentiful , carriers will offer discounts to capture even more cargo in those specific categories .

“ Carriers have elected to ship under commodityspecific rates , even to the East Coast ,” McElroy said . “ The big carriers all have special rates . There are so many special rates that special rates are becoming the effective rate .” The logistics manager at an importer of automotive products said carriers are offering a variety of special rate options . “ We ’ re seeing all of it ,” the source said . “ Things are slowing down .”

“ There are so many special rates that special rates are becoming the effective rate .”

But capacity could tighten again in the coming months . Carriers are expected to deploy 1.41 million TEUs from Asia to the US West Coast in September , compared with 1.51 million TEUs in August , according to maritime intelligence provider eeSea .

US imports from Asia totaled 1.75 million TEUs in July , a 21.5 % increase from July 2023 , according to PIERS , also part of S & P Global .

And US retailers expect another strong month for imports in August , forecasting a 19.2 % year-over-year jump . Imports through the West Coast are expected to be particularly strong because of the growing possibility of a strike by the International Longshoremen ’ s Association when its contract with employers along the East and Gulf coasts expires on Sept . 30 .

email : bill . mongelluzzo @ spglobal . com

Carriers are offering “ bullet ” and “ blended ” Asia – US rates below average spot pricing . Shutterstock . com www . joc . com September 9 , 2024 | Journal of Commerce 17