SCFI: US East Coast rates rise as West Coast congestion escalates

SCFI: US East Coast rates rise as West Coast congestion escalates

HONG KONG — Spot rates on the Asia-U.S. East Coast rose to their highest level in more than a year, evidence that the rapidly deteriorating labor talks on the West Coast is driving cargo owners in search of alternative gateways.

The all-water spot rate from Asia to the East Coast rose $247 to $4,747 per 40-foot container this week, almost double what it was in the same week last year, according to the latest reading of the Shanghai Containerised Freight Index (SCFI).

January is the peak period for shippers importing products for the Easter and early summer sales, but cargo owners using the trans-Pacific continue to be frustrated by the deadlock in negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union.

Ships are backing up rapidly at the major West Coast gateways following a decision by employers to stop working vessels at night in order to concentrate on clearing out congested marine terminal yards.

The Marine Exchange of Southern California reported today (Jan. 15) that 13 container ships were at anchor and awaiting berthing space in Los Angeles-Long Beach. Oakland and Tacoma reported 7 container ships each were at anchor. Although the ports have had vessel backups since last fall, the numbers are now accelerating.

Matt Priest, president of the Footwear Distributors and Retailers of America (FDRA) said this was a critical period for the U.S. footwear industry that is building up inventory for Easter.

“The spring and early summer footwear is being imported now, but a lot of our members have been prepared for what is happening and started bringing in footwear early,” he said. “The alternatives are to divert to ports in Canada and truck cargo down to the U.S., or to ship via Houston or the East Coast.”

However, while cargo owners look for alternative routes to avoid any delays, their options are limited. A spokesman for Evergreen told JOC.com that with more than 70 percent of West Coast container traffic entering the U.S. through Los Angeles-Long Beach, “it is difficult to find suitable alternative gateways to replace those ports.”

The congestion also appeared to hit carrier attempts to hike rates on the trans-Pacific. Spot rates on the Asia-U.S. West Coast trades rose just $159 per 40-foot container this week, despite a $600 general rate increase levied by trans-Pacific carriers on Jan. 15 that was accompanied by a $400 peak season surcharge.

The TSA has announced plans to collect another $600 per FEU in a GRI that will take effect on Feb. 9 in anticipation of strong pre-Lunar New Year shipments from Asia to the U.S. and to ensure carrier costs are “adequately recovered” coming out of the slower winter season. 

“This is a very challenging operating environment for transpacific container lines and it is critical to maintaining service levels that they not leave money on the table during the Lunar New Year period,” said TSA executive administrator Brian Conrad in a statement.

Conrad said while some carriers have reported profitability in the trade in recent quarters, it has come almost entirely from cost-cutting as revenues have shown only marginal improvement over time.

Shipping lines are trying to push up rates to catch Chinese New Year volumes and bump up prices in the run up to contracting season, but with the chaotic waterfront scenes holding up ships and delaying imports, the market seems to have little interest in paying more per box.

According to the SCFI, the trans-Pacific spot rate to the West Coast was $2,089 per FEU this week, 8.2 percent up on last week’s price and 12 percent higher than during the same week last year.

The last GRI was on Dec. 12 when members of the Transpacific Stabilisation Agreement (TSA) imposed a $1,000 levy on customers. That increase achieved just over 50 percent of the sought after GRI, although it quickly began to fall.

On the volatile Asia-North Europe trade, the spot rate rose by a meagre $33 per TEU this week, edging up to 1,008 per TEU in a 3.4 percent increase. That was 41.5 percent lower than in the same week last year, although that was because of a more successful GRI before an earlier 2014 Chinese New Year.

The Asia-Mediterranean spot rate came bouncing back this week, with the SCFI pegging it at $1,360 per 20-foot container, an increase of $186, or almost 16 percent, on last week’s rate. After gaining $528 the week of the mid-Dec GRIs, the rate lost $180 per TEU before this week’s rise arrested the slide.

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.