North Asia-USWC freight rates may fall by 9% MoM for Oct-Jan 2023

Market analytics company S&P Global Commodity Insights projects rates on Platts Container Rate 13 — North Asia-to-West Coast North America — to slide further in the fourth quarter and into the new year before levelling out in February. Platts assessed the spread between PCR5, North Asia-to-US East Coast, and PCR13, North Asia-to-US West Coast, at $4,100/FEU on October 6, well above the historical average closer to $1,000/FEU.

For North Asian cargoes bound for the United States East Coast (USEC), where stronger demand relative to the US West Coast has kept rates firm, rates are expected to fall to around $5,000/FEU in December, which would be 52 per cent lower on the year.

As the market passes by the comparatively sleepy import peak season, expectations abound that North American import freight rates will continue their downward adjustments before settling in the new year.

“We saw rates really drop quite a bit before golden week, they haven't necessarily hit a bottom,” said Kyle Beaulieu, director of ocean strategy with freight forwarder logistics provider Flexport. “[There is] no stabilisation, not clear where that bottom is.”

“I’m seeing the Trans-Pacific rates continuing to dump even more,” a freight forwarder said. “I was surprised to see that they've dipped below $2,000 on the buyer side,” he said, adding that short-term spot prices are unlikely to rebound.

Even as the market is experiencing significant downside, rates from North Asia-USEC have kept a much stronger footing compared to those to the US West Coast, where oceanside congestion has largely evaporated, particularly in Southern California gateways.

As rates are primed to continue adjusting downwards, S&P Global projects the spread to average at just over $2,350/FEU for the January-September 2023 period, signalling some return to normalcy as shippers return to USWC gateways.

While floating spot market rates fell precipitously in the third quarter, carriers unexpectedly demurred from removing capacity until recent weeks, and as such have failed to stymie rate erosions.

However, more recently, carriers have taken to cancelling some services in the face of weak demand, as CMA CGM’s Golden Gate Bridge service, the 2M alliance Sequoia and CULines TPX services have, among others, announced suspension of service, with undetermined resumption dates. All these strings service the Asia-US trade lane.

But liners have been more proactive in recent weeks and taken to blanking specific sailings instead of cutting strings, particularly during the October 1-7 Golden Week holiday in China, when export demand historically lulls and carriers lay-up capacity.

“Week 41 (October 10-16) is the lowest deployment of this year on the trans-Pacific eastbound,” Flexport's Beaulieu said. “What we're on the lookout for based on a drop in demand prior to Golden Week is services beginning to depart the market. I wouldn’t be surprised if we see more services cancelled or suspended.”

“There are still a lot of blank sailings as carriers trying to maximise capacity. There is lots of chaos in schedules due to carriers trying to stop bleeding of profit,” said a US-based freight forwarding source.

Blanked sailings have not been aggressive enough to match foundering demand, said market analyst company Linerlytica in a recent report, noting that planned withdrawals account for 7 per cent of USWC import capacity, and just 1 per cent of USEC capacity, and will likely be offset by easing port congestion in the coming weeks.

Fibre2Fashion News Desk (NB)