Container shipping rates remain on a downward path in September as the most recent round of U.S. tariff increases fails to excite much shipper interest in front loading their imports. Meanwhile, ocean carriers are looking to cut even more shipping capacity in hopes of better demand in the fourth quarter.
Spot rates on the Freightos Baltic Daily Index (SONAR: FBXD.CNAW) for China-North America West Coast fell 8% from last week and are currently $1,327 per forty-foot equivalent unit (FEU). Since the beginning of the year, container rates have dropped a full 34%, despite it being the middle of peak season.
The drop is even steeper compared to last year’s peak season, which saw the start of container front-loading from China ahead of tariff increases. September spot rates are now down 43% from a year earlier and down 14% from 2017.
Freightos Chief Marketing Officer Eytan Buchman said the collapse in September prices is likely related to a more tepid response to the latest round of tariff increases. The U.S. Trade Representative initially set an October 1 start for a round of tariff increases on $200 billion in Chinese goods from 25% to 30%. But President Donald Trump delayed the tariff increase until October 15. But a tariff hike of 15% on $188 billion worth of goods from China starting December are likely to revive container shipping demand.
“Trans-Pacific pricing remains at the mercy of the trade tariff war,” Buchman said in a note. The most recent tariff change “carries less clout than predecessors due to the short, five week notice and the limited scope of goods affected.
“Given the weak peak season prices, carriers will be banking on post-Golden Week increases, as well as the December 15 tariff change, to shore up prices. With a significantly longer four month notice, there’s a better chance that this tariff increase will lead to increased shipping – and freight rates – come October and November.”
The downturn in the trans-Pacific trade is forcing lines to cut more sailings. U.K.-based PR News Service said the Ocean Alliance plans to cut up to seven sailings from between October 15 and December 2, 2019 in order to come up with the weak demand. This comes on top of the nine weekly sailings from Asia to the U.S. West Coast that were already cancelled due to the slowdown during China’s Golden Week celebration.
The latest round of voided sailings includes two, 8,830 TEU sailings for the Port of Long Beach at the end of November and start of December. Two weekly services into the Port of Los Angeles will also be cut in mid-December, one with 13,940 TEU in capacity and another with 6,680 TEU of capacity. A Seattle sailing of a 10,800-TEU capacity service will also be dropped in December. A 9,940 TEU service into Prince Rupert will blank a December sailing, as will a 5,580 TEU service in Vancouver.
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