Spot rates from Asia to the US East and West coasts increased for the first time in two months, proving there is still some life left in this year’s peak season as importers work to dodge a rate hike.
The spot rate this week for shipping a 40-foot container from Shanghai to the East Coast was $2,075, an increase of 18.2 percent from last week. The West Coast rate was $1,512 per FEU, up 10.7 percent from last week, according to the Shanghai Containerized Freight Index published under the Market Data Hub on JOC.com.
However, compared with last year in late October, the East Coast rate is down 27.1 percent and the West Coast rate is down 38.1 percent. The trade last fall was dealing with the aftermath of the Hanjin Shipping bankruptcy on Aug. 31, 2016.
Retailers attempt to have their final shipments of holiday merchandise received in the United States by early November so the products will be on store shelves for the Black Friday sales on the day after Thanksgiving, and that undoubtedly accounted for the surge in imports this week.
Also, some carriers had announced general rate increases effective Nov. 1. Carriers the past two months had announced similar GRIs, but ships were not full so they were unable to enforce the increases. Their ability to do so this week indicates vessel utilization rates were quite high.
Carriers since the Hanin bankruptcy have achieved modest rate levels after six years of declines. “Finally, there were some gains in rate levels this year, although rates are not at the level of a sustainable situation,” Dick Craig, president and CEO America at MOL, told the annual Footwear Trade Distribution and Customs conference Monday in Long Beach.
Globally, vessel capacity this year will increase 5.9 percent and cargo volume is projected to increase 2.4 percent, and next year capacity is projected to increase 4.1 percent and demand will likely increase about 3 percent, Craig said.
IHS Markit forecasts that capacity will rise 2.4 percent as trade grows 3.7 percent, while capacity will grow 4.2 percent as trade expands 4.9 percent in 2018.
On a positive note, carriers on April 1 successfully pulled off a major realignment of their vessel-sharing alliances with no major glitches, he said. This was true even in Los Angeles-Long Beach, where carriers shuffled their calls among 12 different marine terminals. “It went fairly smoothly. There wasn’t a lot of operational impact,” said Alan McCorkle, vice president of West Coast operations at Yusen Terminals in Los Angeles.