Asia-US spot rates surge, but little rolled cargo

Asia-US spot rates surge, but little rolled cargo

Sustained increases in spot rates this time of year occur when beneficial cargo owners panic because their shipments are being rolled in Asia when vessels are overbooked. That is not happening today. Photo credit: Shutterstock.com.

Eastbound trans-Pacific spot rates may have surged by double digits this week, but infrequent rolling of cargo, as reported by carriers and non-vessel operating common carriers (NVOs), suggests sustained increases this peak season are unlikely. 

Spot rates from Asia this week surged 25.6 percent to the West Coast and 10.5 percent to the East Coast. However, NVOs see this as an anomaly fueled by tariff fears and a Sept. 1 general rate increase (GRI), and not the beginning of sustained peak-season rate hikes.

Sustained increases in spot rates this time of year occur when beneficial cargo owners (BCOs) panic because their shipments are being rolled in Asia when vessels are overbooked. That is not happening today. “I have not had a single roll. Nothing,” David Bennett, president of the Americas at Globe Express Services, told JOC.com Friday.

“I feel this may be a temporary blip because of the tariffs,” said Kevin Krause, vice president of ocean services at SEKO Logistics. He said carriers might pull back from those rates in the coming weeks unless space suddenly tightens on vessels leaving Asia, something he does not expect to occur. “I’m not seeing any issues with space,” Krause said.

The spot rate to the West Coast rose to $1,615 per FEU, up from $1,240 last week, and the first week-over-week increase since late July. The East Coast rate increased to $2,691 per FEU from $2,436 last week, according to the Shanghai Containerized Freight Index (SCFI) published in the JOC Shipping & Logistics Pricing Hub

Previous GRIs this summer in the eastbound Pacific deteriorated in subsequent weeks, which indicates that growth in US imports from Asia has been modest, at best. That is why NVOs, who represent a wide variety of BCOs, believe the main driver of this week’s double-digit increase in spot rates was due primarily to BCOs attempting to get ahead of Trump administration tariffs announced for Sept. 1, even though some of the tariffs were delayed until Dec. 15.  “The whole market this year is moved more by tariffs than anything else,” Bennett said.

To be sustained, the spot rate increases must result from surging imports of holiday season merchandise in September and October, but, Bennett said, “It’s just not there.”

Spot rates down double digits from last year

Industry consultant and NVO Jon Monroe said a number of customers moved shipments forward due to the tariffs, but growth this year is nowhere near what it was last year when imports began to increase in July and remained strong through the end of the year. With no space shortages in Asia all season, GRIs that have been announced effective the first of each month “have almost become a bit of a joke,” Monroe said.

The spot rates this week are down considerably from the same weeks last year — 29.7 percent lower to the West Coast and 22.8 percent lower to the East Coast, according to the SCFI.  

US containerized imports from Asia in the first half of 2019 were up only 1.4 percent compared with the same period last year, and imports from China were down 5 percent, according to PIERS, a JOC.com sister company within IHS Markit.

Merchandise imports are projected to decline 0.6 percent in August, 1.1 percent in September, and 6.2 percent in October from the same months last year, according to Global Port Tracker, which is published by the National Retail Federation and Hackett Associates. Imports are projected to increase 1.8 percent in November and then drop 7.9 percent in December, Global Port Tracker said.

Carriers have already signaled their concern over peak season import growth by announcing the blanking of eight sailings to the West Coast in October and two to the East Coast, according to Sea-Intelligence Maritime Consulting. The voided sailings are scheduled for Golden Week (Oct. 2-7) in China, or in the following weeks when import volumes will drop. Based on previous years’ experience, additional blanked sailings could be announced, said Alan Murphy, CEO and co-founder of Sea-Intelligence.

With retailers’ inventory levels in the United States already quite high, it does not appear that a late peak-season surge in imports will occur as normally happens in October. Nevertheless, imports usually peak in October so merchandise will be on store shelves for Black Friday sales after Thanksgiving. Therefore, SEKO continues to advise its customers to book early to ensure they will secure space during the busiest month of the year, Krause said.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.