While there are some indications that the United States is climbing out of recession faster than Europe, Drewry, the London-based consulting firm, said in the Eastbound transpacific trade “this year’s peak season in the third quarter is unlikely to be substantial, or last long, which means that vessel capacity will have to be withdrawn before October to prevent freight rates falling further.”
Drewry noted full-container volumes in Los Angeles and Long Beach are up 3.1 percent for the first five months of the year from all destinations and that trade from Asia to the West Coast of North America is up 6.7 percent, citing figures from Container Trades Statistics.
“Year-on-year growth is only of long-term interest to ocean carriers, however, as ships still need to be filled today,” Drewry said.
It explained average utilization of all vessels sailing from Asia to the West Coast of North America increased from 91 percent to 92 percent between April and May, saying while that was healthy, it was “not enough to stop freight rates continuing to decline.”
In the other direction, Drewry said exports from the West Coast of North America to Asia are down 3 percent in the first five months of this year compared to the same period in 2012.
“China, it seems, is still not yet ready to convert its massive balance of payments surplus with the U.S. into imports, preferring instead to continue sourcing most of its requirements from the rest of Asia,” Drewry said.
It said “freight rates from Asia to the West Coast of North America continued falling progressively in 2Q 13, which did not help with the re-negotiation of annual BCO contracts taking effect on 1 May.”
“Industry feedback suggests that carriers got little uplift on last year’s rates,” it added.
Drewry said a recommendation by the Transpacific Stabilization Agreement for a general rate increase (GRI) of $400 per 40-foot container on July 1 “appears to have been initially followed by all members as spot rates quoted to forwarders increased by the full amount between 26 June and 3 July,” up to $2,236 per 40 foot container, even though it said market fundamentals remained unchanged.
Drewry noted TSA has also recommended a peak season surcharge of $400 per 40 foot container on Aug. 1, but said the need for the surcharge “is unconvincing, bearing in mind that the charge is meant to pay for temporarily high container equipment imbalance costs.”
Drewry predicts the July GRI is “unlikely to last long as ocean carriers are not in a risk-taking mood. Market share will become increasingly important as the introduction of the P3 Alliance’s services approaches” in the second quarter of 2014.
Last week, the Shanghai Container Freight Index indicated the cost of moving a container from Shanghai to the U.S. West Coast rose $17 to $2,131 and the to the U.S. East Coast rose $12 to $3,373. (The prior week, the same indexes had taken a big increase, $269 and $377, respectively, which some analysts said reflected the July 1 rate increased recommended by the TSA.) - Chris Dupin