Freight rates and U.S. West Coast ports are still showing no sign of weakness in the wake of tariffs imposed on China.
Trade from China to the United States is holding strong, with high spot container rates and U.S. West Coast ports yet to see declines in box volumes in the wake of new tariffs entering force.
On July 6, the U.S. implemented a 25 percent tariff on goods from China totaling $34 billion in annual import value; on Aug. 23, the U.S. implemented a second tranche of 25 percent tariffs on goods from China with an annual import of $16 billion; and on Sept. 24, the U.S. implemented tariffs on goods from China with an annual import value of $200 billion. The tariff on this third tranche of goods will total 10 percent until Jan. 1, when it will increase to 25 percent.
After the first and second round of tariffs were issued by the United States, China immediately retaliated by implementing a 25 percent tariff on the same value amount of U.S. goods, and on Sept. 24, China issued 5 percent to 10 percent tariffs across $60 billion worth of U.S. goods.
Eytan Buchman, vice president of marketing at Freightos, a freight rate marketplace and rate management software provider, said in late September that the United States’ latest round of tariffs against China “may help stave off an early end to peak season.”
“However, while carriers may be reaping the benefits of impending tariffs today, the long-term impact of the tariffs will almost certainly be far more negative, casting uncertainty for carrier profitability in 2019,” Buchman added.
The charts below, constructed using data from the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index (SCFI), Drewry’s World Container Index (WCI) and the Freightos Baltic Index (FBX), illustrate in red when spot container rates were the highest on the trade during this year’s peak season. All three indexes illustrate how rates on the trade still have yet to significantly decline.
Additionally, loaded import container volumes into prominent U.S. West Coast ports still have yet to decline from the tariffs. Loaded import volumes into the Port of Long Beach fell 2.5 percent year-over-year in September, while loaded import volumes into the Port of Oakland rose 5 percent year-over-year during the month, as illustrated in the charts below, which were constructed using data from the ports.
Although September figures have yet to be released for the Port of Los Angeles and the Northwest Seaport Alliance, a marine cargo operating partnership of the ports of Seattle and Tacoma, both saw loaded imports in August modestly decline year-over-year, by 2.8 percent and 3.7 percent, respectively.
The Port of Los Angeles touts itself as the busiest seaport in the Western Hemisphere and has ranked as the No. 1 container port in the United States each year since 2000.
For the first eight months of 2018, the Port of Los Angeles handled 6 million TEUs, down 2.6 percent from the corresponding 2017 period.
The nearby Port of Long Beach handled 5.3 million TEUs during the first eight months of 2018, up 9.4 percent year-over-year. “We had a very strong first six months and we think that most of that is due to the increase in consumer demand in the U.S. and abroad,” a Port of Long Beach spokesperson told BlueWater Reporting in early October. “That was the main driver of our increases. The announcement of the tariffs likely had the effect of increasing shipments through the port up until the summer.
“For the current quarter, we are slightly down from the same period last year, but we feel that is mostly due to the effect of a couple shipping lines switching regular services for two or three monthly ships and seeing that cargo go to our neighbor, the Port of L.A.,” the spokesperson added.
Meanwhile, the Port of Oakland handled 1.7 million TEUs during the first eight months of 2018, up 3.3 percent year-over-year, while the Northwest Seaport Alliance handled 2.4 million TEUs, down 1.7 percent, as illustrated in the chart below, which was constructed using data from the ports.
Although the Port of Oakland is called by more container services than Los Angeles and Long Beach, it handles less cargo than those two ports because all services coming from Asia that call the Port of Oakland call either the Los Angeles Long Beach first, resulting in more cargo being offloaded at these southern California ports than in Oakland.
The chart below uses data from BlueWater Reporting to show the strong ties these prominent U.S. West Coast ports have with China. The Port of Oakland is called by 27 container services that connect it to regions outside North America, in which 12 of these services, or 44 percent, bring cargo from China. This is a lower percentage than the ports of Los Angeles and Long Beach, as well as the Northwest Seaport Alliance.
Although 111 transits are offered via container services from China to Los Angeles, Long Beach, Oakland or the Northwest Seaport Alliance ports, only 38 transits from China to these ports are 15 days or less, as illustrated in the chart below, which was built using data from BlueWater Reporting.
In early October, the Port of Long Beach spokesperson said the port believes it’s too early to see the negative effects of tariffs on its cargo stats, while the Port of Oakland also reiterated that it’s still too soon to project the impact of 2018 tariff increase on cargo from China.
However, looking ahead, Mario Cordero, executive director of the Port of Long Beach, said, “Consumers are likely to see higher prices, so they’ll buy less, and businesses will be squeezed to maintain a profit. That cycle could have the unintended consequence of negatively impacting jobs and the economy.”
© 2018 BlueWater Reporting (www.BlueWaterReporting.com) Used with permission