Ocean freight rates between the US West Coast and China remain high. In fact, they are higher than they were in April 2020. Long-term contracts involving shipments moving over three months remain 2.7% higher than short-term transpacific movement. The average cost to move a 40-tot container from China to the US west coast via a long-term contract is now around $7,980 which is double the price of a year ago which was $3,070. This reflects a 47% increase.
Cargo owners who utilize the transpacific trade lane are worried about the labor contract expiration on July 1 which involves 22,000 American dockworkers. The International Longshore and Warehouse Union along with the Pacific Maritime Association represent 70 employers who are negotiating new contracts across 29 of the west coast ports.
At this time, it is hoped that both parties will reach a deal to help avoid any potential disruptions that could further complicate the supply chain and drive prices even higher.
Peter Sand, Xeneta’s chief analyst stated, “While we await the signing of a new contract between ILWU and PMA, other aspects are also important when forecasting where rates are heading.” He went on to state that consumer spending and the pressure of inflation will also impact prices even further.
A freight rate reversal will impact smaller shippers of cargo. Big customers with container services who combine contracted volumes along with spot market exposure are not proving that critical.
Carriers may offer space at a lower price but freight forwarders who sell on the spot market will end up experiencing a higher price from the carrier.
To some degree, transpacific freight rates have come down. The increasing inventory levels and fears of a recession in the US are also bringing rates down to a certain degree. However, with the reopening of the Chinese economy, price increases could become a reality.
At this time, the transportation costs for many of the trade lanes remain five times higher than they were five years ago. Many shippers have secured contract rates at more than double or even triple the price they once paid carriers.
If you have freight questions, please contact Sobel Network Shipping Co.
