One way to examine the fallout of the U.S.-China trade dispute is to analyze the curves of global container-shipping pricing over the past year. The data clearly shows the extent to which the trans-Pacific trade has faltered in relation to both the global average and the Asia-to-Europe lane.
The Freightos Baltic Daily Index and the Drewry World Container Index track the price to ship 40-foot-equivalent unit (FEU) containers on a daily and weekly basis, respectively. Freightos and Drewry track multiple trade lanes and amalgamate those data points into a global composite. The curves of the two separately calculated global indices have been closely correlated over the past year, confirming the underlying trend.
The Freightos Baltic Daily Index Global (SONAR: FBXD.GLBL) shows a pricing decline during the first quarter followed by a “bounce along the bottom” since April, with particular weakness in October and a rebound to April levels this month. Year-over-year, the Freightos global index is now down 19%.
The Drewry Global Composite Index (SONAR: WCI.GLOBCOMP) shows a slightly steeper drop in late September and early October, but in general, it’s shape closely matches the Freightos curve. It is also down 19% year-on-year.
The price paid to ship containers results from two forces — vessel supply and cargo demand. That said, the shipping price is generally viewed as an indicator of cargo demand.
If so, and if U.S.-China trade tensions have affected that demand, the pricing on the trans-Pacific route should be materially lower than the global average. And if that’s true, the pricing on the Asia-Europe route should be higher than the global index level because the global composite is represents an average of the Asia-U.S. and Asia-Europe box flows, in addition to smaller ones.
That is exactly what the container pricing data shows. On the trans-Pacific route, the Freightos index covering shipments from China to the North American West Coast (SONAR: FBXD.CNAW) is down 44% year-on year. The Freightos index covering shipments from China that traverse the Panama Canal and unload on the U.S. East Coast (SONAR: FBXD.CNAE) is down 31%.
In the Asia-to-Europe trade — the most important lane for container shipping — the Freightos index tracking China-to-North Europe shipments (SONAR: FBXD.CNAR) has consistently outperformed the global average throughout 2019 and is now up 1% year-on-year.
The index tracking the China-to-Mediterranean route pricing (SONAR: FBXD.CMED) is currently down 14% year-on-year — again, better than the global average. Furthermore, the Mediterranean index has come down significantly since September. Earlier in the year, it not only handily topped global average pricing, it often sharply exceeded pricing in the Asia-to-North Europe market.
One can argue with the two premises — (a) that box rates are an accurate proxy for demand and (b) that trade tensions are the reason for lower demand — but the fact remains: The Asia-Europe market has significantly outperformed the Asia-U.S. market this year. More FreightWaves/American Shipper articles by Greg Miller
Editor’s note: Freightos has a business agreement with FreightWaves that includes editorial coverage.