Volume, spot rate rise show US East Coast diversions’ staying power

Volume, spot rate rise show US East Coast diversions’ staying power

Spot rates and volume from China to the U.S. East Coast continued to rise through March, signs that West Coast congestion is still driving cargo owners to other ports.

Eastbound spot rates on the China-East Coast lane were up almost 11 percent in March year-over-year, according to the Shanghai Containerised Freight Index.

In March, the top 7 carriers in that lane — Maersk Line, Evergreen Line, Mediterranean Shipping Co., CMA CGM, Hanjin Shipping, Cosco and Yang Ming Line — moved 38 percent more TEUs from China to the East Coast year-over-year, a 6 percent increase over February amounting to 134,000 TEUs moved in March alone, according to PIERS, a sister company of JOC.com within IHS Maritime and Trade.

Not only are shipping lines still opting for East Coast ports, said JOC analyst Keith Bucco.

“But it looks like it’s even having a little bit of an uptick,” he said. “We are actually seeing some specific carriers with cargo increases to the East Coast.”

Maersk Line, the largest carrier in the lane, moved 26,000 TEUs from China to the East Coast in March alone, up 48 percent and over 8,000 more TEUs year-over-year, according to PIERS.

Evergreen, Hanjin, Cosco, Yang Ming, they all had significant increases March over March.

It’s the most Chinese imports the U.S. East Coast has seen in nearly two years, Bucco said.

“It hasn’t been this high or stayed this high since October 2013,” he told JOC.com on Friday. “It seems that because of all the congestion on the West Coast, shippers started diverting cargo to the East Coast last year and it seems like that has stayed the trend.”

Shippers started diverting cargo during the peak of the West Coast port crisis in late spring.

In January, the peak period for shippers importing products for the Easter and early summer sales, labor negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union deteriorated.

Frustrated by the deadlock in negotiations, shippers diverted goods through gateways further north in Canada, further south in Mexico and through the Panama and Suez canals to the U.S. East Coast.

In that month alone, Global Port Tracker reported East Coast ports handled 45 percent of all cargo container traffic entering the United States, up from 36 percent year-over-year. Asia-East Coast spot rates skyrocketed.

By mid-January, the all-water spot rate from Asia to the East Coast rose $247 to $4,747 per 40-foot container in one week, almost double what it was in the same week the year before, according to the SCFI.

A month later, the PMA and the ILWU would reach a tentative five-year agreement and port operators promised to restore productivity and reclaim lost cargo traffic.

Nevertheless, the cargo diversions have not reversed course, said Bucco.

In March, a month after union leaders and port operators shook hands, cargo was still being pushed to the East Coast.

“It all seems like an indicator this is here to stay for a while,” Bucco said.

Contact Reynolds Hutchins at rhutchins@joc.com and follow him on Twitter: @Hutchins_JOC.