In a striking deviation, recent patterns in the ocean container shipping market have shown disparate trends across key trade routes, particularly when observing the trans-Pacific route from the Far East to the U.S. This once bustling trade route has witnessed a severe downturn, which starkly contrasts with its previous upward trajectory.
Such a severe plunge in the market average for services from the Far East to the U.S. West Coast notably counters the surge experienced on June 1. This slump in spot rates has effectively reversed the previously mounting momentum, leaving rates at $3,317 per forty foot equivalent unit (FEU) on June 27. This is only a marginal 6% increase from the rates observed on May 31.
One cannot overlook the significant impact of the ongoing trade war between the U.S. and China when assessing this route. It does not stretch the imagination to visualize how this economic tension is leading to an excess of supply over demand. This space of momentum shifts has also provided shippers with more bargaining power to challenge peak season surcharges imposed by carriers.
In contrast, a milder decline has been seen when looking at the market average on the trade route from the Far East to the U.S. East Coast. This route has experienced a 9% downturn since June 1, with rates dropping to $5,990 per FEU.
However, despite this lesser decline, the spot rate on June 27 was still a significant 43% higher than on May 31. The differential between the coasts came in at $2,673, marking it as the highest in a period of 10 months.
Since the beginning of June, there’s been a nosedive in the average spot rates from Far East to the U.S. West Coast, dropping by 39%. This drop hasn’t been as pronounced on the route into the U.S. East Coast, where rates have remained more resilient.
The trans-Pacific route into the U.S. West Coast is central to the decision-making of carriers when managing exports from China. Because of this, the spot rates here have taken a harder hit and have plummeted more rapidly following the lowering of 145% tariffs.
In the meantime, average spot rates for routes from the Far East to the Mediterranean and North Europe have maintained a high level. In spite of the leaps experienced in early and mid-June, the rates remain high, with rates to the Mediterranean and North Europe on June 27 increasing by 5% and 14% respectively compared to June 1.
The sustained demand in these regions is thought to be the primary cause behind these higher rates. Conversely, the trade route from North Europe to the U.S. East Coast has exhibited little fluctuations, with the market average standing still compared to the previous week at $2,105 per FEU.
This reflects a modest increase of just 3% from May 31. The current dynamics of this route are largely dictated by negotiations between the European Commission and Washington for a new trade agreement. This is further complicated by the nearing expiration of the 90-day pause on higher tariffs on July 9.
In light of these circumstances, shippers have begun to push back on carriers’ increased rates and peak season surcharges, forcing carriers to reassess their pricing strategies. It appears to be only a matter of time before shippers start exerting similar pressure on the route into the U.S. East Coast, potentially leading to a steep drop in spot rates on this trade lane as well.