The upcoming week will be pivotal in determining the stability of the trans-Pacific market for the peak shipping season this fall, as container lines attempt to raise spot rates from Asia to the US.
This year’s peak season began earlier than usual, starting in May instead of August, driven by the frontloading of import cargo. Increased capacity to the US West Coast has led to a decline in container spot rates over the past five weeks, as reported by various pricing indexes.
The next few days are critical for carriers and non-vessel-operating common carriers (NVOs) to establish a baseline for West Coast spot rates. The question remains whether additional capacity will further depress prices below the highs of early July.
Typically, about 60% of eastbound trans-Pacific volumes are shipped under contract rates, with the remaining 40% on spot rates. However, when space is limited, carriers prioritize higher-paying spot and FAK cargo, reducing the contract rate share to about 45%.
Carriers and NVOs reported that most lines are targeting general rate increases (GRIs) of $200 to $400 per FEU, effective September 1. Currently, spot rates are quoted at $7,100 to $7,200 per FEU to the West Coast and $9,800 to $9,900 per FEU to the East Coast.
Nevertheless, some carriers are offering lower “bullet” rates of just over $6,000 per FEU from major Chinese ports to the West Coast, and smaller lines are providing similar rates across all sailings.
Despite five consecutive GRIs since May 1, Asia-US spot rates peaked at $8,133 per FEU to the West Coast and $10,133 per FEU to the East Coast in early July, before dropping to $6,000 and $9,000 per FEU, respectively, as of Friday.
Shippers and NVOs now have a wider range of rate options than before, including special bullet and port pair-specific rates from larger alliance members, lower rates from smaller lines, and single-voyage “extra-loader” vessels deployed this summer.
For example, Matson Navigation added an extra-loader vessel to its weekly service from China to Long Beach and plans to introduce another due to continued strong demand for their differentiated service.
With 10 new or reinstated services from Asia to the West Coast this year, rates are expected to decline further. Some NVOs already report offers below $6,000 per FEU.
The East Coast spot rates may hold up for another week or two, but a rapid decline is anticipated by late August. This is partly due to the upcoming expiration of the International Longshoremen’s Association (ILA) contract on September 30, which increases the risk of a strike.
Import volumes from Asia to the East Coast have remained strong, peaking in August due to the need for holiday merchandise to reach stores by Black Friday. However, concerns over a potential ILA strike could prompt retailers to avoid further shipments to the East Coast.
Overall, spot rate fluctuations and GRIs have had the greatest impact on NVOs, who rely more on spot rates compared to major retailers. Some cargo owners, however, have mitigated these risks by securing a significant portion of their volume under long-term contracts, providing some insulation from the volatile spot market.
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