New week sees ocean container rates soar

The pause in the tariff fight that amounted to a trade embargo between China and the United States has seen a marked increase in container shipping rates, particularly on trans-Pacific routes. 

The Freightos Baltic Index this past week saw Asia-U.S. West Coast rates fall 1% to $2,767 per forty-foot equivalent unit. While Asia-U.S. East Coast prices declined 6% to $3,979 per FEU, container rates on the Asia to North America route have again soared amid rising tensions between Washington and Beijing. 

This surge can be attributed to the looming deadline for a trade agreement, set for Aug. 14, and the potential for increased tariffs if negotiations falter. The anticipation of heightened tariffs has led to a rush among shippers to import goods before the deadline, consequently driving up rates sharply this week. 

General rate increases and peak season surcharges by carriers that went into effect June 1 saw prices to the West Coast spike by 72% to $4,765 per FEU, while East Coast prices climbed by 44%, reaching $5,721 per FEU.

The steep rise highlights the urgency among shippers to expedite deliveries, opting for shorter transit times amid uncertainty, said Freightos research chief Judah Levine, in a note. This urgency is further compounded by the strategic scheduling of additional capacity by carriers to the West Coast, aiming to accommodate the increased demand. Indeed, carriers have scheduled record capacity levels, extending through July, to cater to the augmented demand on this route.

SONAR data for June 1-4 correlated the increases, as spot rates from Yantian to Los Angeles rose from $5,610 to $6,000 per FEU, while prices from Ningbo to LA moved from $5,151 to $5,431.

Moreover, the swelling demand for trans-Pacific capacity has induced congestion at major Asian ports, including in China and Singapore. This congestion presents a bottleneck, testing the resiliency of supply chains. However, officials at the ports of Los Angeles and Long Beach have assured stakeholders that they are equipped to manage the increased cargo volumes without significant delays.

On the Asia-Europe route, a similar trend in rising rates is observed, albeit driven by different factors.

Rates for containers destined for Northern Europe have increased by $300, to $2,650 per FEU, while those bound for the Mediterranean saw a rise of about $600, reaching $3,575 per FEU. The fluctuations here are partially due to some carriers rerouting vessels to meet the heightened trans-Pacific demand, said Levine. That has inadvertently reduced capacity on the Asia-Europe routes. This shift has exerted upward pressure on prices, exacerbated by congestion at European ports.

Despite the clear upward trajectory, market skepticism remains as to whether these increased rates are sustainable, given the relatively flat overall demand on these routes. Even so, the rates hold firm at double their 2019 levels, buoyed by constraints such as capacity limitations from Red Sea route diversions.

Missile attacks on Israel by Houthi rebels in Yemen continue to make the Suez Canal route too unstable for most major container carriers. CMA CGM of France is the exception and recently announced additional scheduled services in the region. The American battle group led by the aircraft carrier USS Harry S. Truman recently exited the Red Sea after an intense month of bombing campaigns against Houthi targets.   

Find more articles by Stuart Chirls here.

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