Shippers feel transpacific squeeze

Peak season, tariffs and discontinued services result in tight capacity and rising freight rates.     Container freight rates in the eastbound transpacific container trade continue to rise, with tight capacity and reports that shippers are seeing their exports from Asia to the U.S. being “rolled” from ships they are booked on to subsequent voyages.
    The tightness in the market is being attributed to several factors: normal volume increases in the fall “peak season,” the withdrawal of several transpacific service strings this summer by the major container shipping alliances and shippers advancing shipments in an attempt to avoid higher U.S. tariffs on Chinese goods.
     On Friday, the Shanghai Shipping Exchange, which provides estimated spot freight rates, pegged the rate from Shanghai to U.S. West Coast ports at $2,126 per FEU, $40 more than a week earlier. From Shanghai to U.S. East Coast ports, the exchange reported the rate was $3,329 per FEU, $12 higher than a week earlier.
   “It’s tighter than we’ve seen in a few years after a lot of years of mild peaks, of peaks that never came,” said Spencer Strader, director of imports at the logistics company ECU Worldwide.
    It’s unclear how long capacity in the transpacific will remain tight. “I don’t see it letting up for eight to 10 weeks,” said Strader, while Graham Cousins, chief strategy officer at the NVOCC Vanguard Logistic Services, said, “We think this will go on for six weeks or so, but not much longer.”
    Lars Jensen, the chief executive officer of SeaIntelligence Consulting, said there may be a pause in demand around the Golden Week holiday around China’s National Day on Oct. 1 that commemorates the founding of the People’s Republic of China.
    Tim Seifert, a spokesman for Hapag-Lloyd, said the company is experiencing a seasonal peak surge.
   “Unfortunately, it is difficult to quantity if/how much of this is due to advancing orders with regards to looming tariffs, but we do suspect that most factories in China are running full capacity anyway as part of the annual surge in demand and therefore assume that there is little room left to increase volumes beyond what has already been ordered,” he said.
    BlueWater Reporting reports each of the major alliances — the 2M, Ocean and THE alliance — suspended or discontinued a transpacific string of ships this summer. These weekly services included:
    • The TP1/New Eagle service of the 2M Alliance, Maersk and MSC. The service, which ended in July, utilized six vessels, with average capacity of 4,622 TEUs operating in port rotation of Kaohsiung, Yantian Shenzhen, Xiamen, Shanghai, Busan, Vancouver, Seattle, Yokohama, Busan and Kaohsiung.
    • The Pacific Southwest Loop 8-PS8 of THE Alliance, with members Hapag-Lloyd, Ocean Network Express and Yang Ming. That service, also suspended in July, had six vessels with average capacity of 6,571 TEUs and a port rotation of Xingang/Tianjin, Qingdao, Shanghai, Busan, Prince Rupert, Los Angeles, Tacoma, Busan, Gwangyang and Xingang.
    • The Ocean Alliance (COSCO, OOCL, CMA CGM and Evergreen) ended the AAC/PCC2/Huangpu River Express service this month. The service used six ships with an average capacity of 10,038 TEUs operating in a rotation of Lianyungang, Shanghai, Ningbo, Long Beach, Seattle and Lianyungang.
    However, APL, which is owned by CMA CGM, added capacity with its Eagle Express or EXX string that employs five 4,832-TEU ships operating in a Ningbo-Shanghai-Los Angeles-Dutch Harbor-Yokohama-Busan-Ningbo rotation.
    “Put all those together and add back in the new service, you have quite a net reduction in capacity to the West Coast,” said Simon Heaney, senior manager of container research at Drewry.
    If cargo has been pushed forward to avoid tariffs that went into effect last week, there could be a lull afterward, he added.
    ECU Worldwide’s Strader said the reason capacity may be particularly tight on services to the West Coast is that shippers may have opted to use West Coast ports in order to get cargo as quickly as possible to the U.S. in order to beat the tariffs that went into effect Thursday.
   An article in Lloyd’s List last week quoted Panalpina executive Sriram Vaithiyanathan as saying demand for transpacific slots was 20 percent to 25 percent higher than a year ago and that rollovers were a “regular phenomena.”
   Panalpina said cargo has been rolled since mid August. Joerg Twachtmann, global head of Ocean Freight FCL at Panalpina said his company had expected a tight market situation to develop in the last week of August, “but  the ‘trade taxes’ have pushed the cargo peak a bit forward. Carriers have also rationalized the available capacity. Demand in the USA remains very high.”
He said the company knows of many shippers that have been impacted, and that the issue “is severe for shippers,particularly if their cargo is time-sensitive.”
    Lloyd’s List cited an Alphaliner report that said Maersk in August added two “extra loaders” — ships to provide supplemental capacity — between Asia and North America, one to the U.S. West Coast and one to the U.S. East Coast.
    Twachtmann said he knew of three extra loaders planned for weeks 36 and 37, the period between September 3 and 16.
    Seifert said Hapag-Lloyd currently has “no plans to deploy extra loaders in the transpacific eastbound market. As in previous years, we expect the surge to tail off by early to mid-October.”
    Last week the New York Shipping Exchange noted Maersk, Hapag-Lloyd, CMA CGM and OOCL are offers contracts in the transpacific eastbound trade, that provides shippers with guaranteed rates and space.
    The shortage of capacity is not affecting all shippers equally.
    Cousins says Vanguard has regular volumes and strong relationships with carriers “in terms of ensuring that our cargo doesn’t roll.”
    Strader said he has heard about shortages of empty containers or particular equipment such as 40-foot-high cube containers in South China in ports such as Shenzhen.
    If the tariff war between China and the United States is not resolved and tariffs are imposed on an additional $200 billion in products, Strader said companies may move more manufacturing, particularly of low-value consumer products and garments, out of China to locations elsewhere in Asia such as Vietnam and Malaysia.
   That could create problems if the vessels serving those countries and their infrastructure are not able to support the greater volumes, he said.