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Possible USEC Strike Impacts Spot Freight Rates and Volume Destinations

Estibadores y operadores de EE.UU. alcanzan un acuerdo para finalizar huelga en la USEC y USGC

A slight decrease in rates is observed on the Asia-USEC route, while rates for containers heading to USWC are expected to increase.

The window for vessel calls navigating the Transpacific route to the East Coast and Gulf of the U.S. (USEC and USGC) is practically closed before a potential port workers’ strike set to begin on October 1st. “This may be reflected in the slight decrease in rates to the USEC observed last week, although prices are still only 2% below their July peak”, comments Judah Levine, Head of Analysis at Freightos.

In detail, spot freight rates, according to the Freightos Baltic Index (FBX), on the Far East-US East Coast (USEC) route reached $9,409/FEU, marking a weekly decrease of 3%. The analyst notes that the imminent strike may be driving more volumes to the US West Coast (USWC), which supports a slight rebound in rates since mid-August. This is despite the fact that rates on the USWC route reached $6,858/FEU during the week, marking a 4% decrease.

According to Levine, rates on this latter route are still 15% below their peak for the year, reached in mid-July. “It is likely that part of this rate decrease is also due to increased capacity, including those driven by opportunistic shipping lines that launched services on the Transpacific route when rates were rising earlier this summer”.

Levine also comments on reports of a recent increase in competition for customers on the Transpacific route, with some of these smaller shipping lines already offering discounted rates as a result. “If this is an indication of excess capacity on this route and larger shipping lines are forced to follow suit, we might expect overall rates to decrease as well”, he projects.

On the other hand, he adds, there are also signs (including increases in train wait times at some Long Beach terminals) that demand remains strong towards the US West Coast (USWC). In fact, he notes, “some shipping lines are scheduling additional sailings for the next two months, although this move may be more of a preemptive measure in anticipation of a growing shift away from the East Coast rather than an indication that peak season demand will extend into October”.

Situation in the Rest of the World

For shipments heading to Northern Europe and the Mediterranean, the window for high-season cargo arrivals this year is closing (considering the longer transit times around the southern tip of Africa and the upcoming traditional slowdown during Golden Week in China). According to Levine, this alleviates some of the demand pressure on rates. However, he notes, “rates to Northern Europe remain five times higher than in 2019, but relative to their July peaks, they have now decreased by 10% to Northern Europe and 19% to the Mediterranean”.

Meanwhile, Levine explains that the decrease in demand and increases in capacity had led to smoother operations from the ports on India’s west coast, but severe storm-induced flooding last week is causing delays again at the port of Mundra.

At the same time, he describes that congestion remains above normal levels at some Far Eastern hubs. However, the better distribution of transshipment containers across more ports compared to May, when these volumes overwhelmed key ports like Singapore and Colombo, is a factor contributing to more manageable wait times at these ports.

Air Cargo

Finally, cross-border e-commerce volumes continue to be a significant driver of air cargo demand, and the industry is still adapting to this new reality. This demand growth is occurring even during what are typically slow months for the market, keeping rates high.

According to the Freightos Air Index, the benchmark rates from China were $5.12/kg to North America last week and $3.61/kg to Europe.

Source: MundoMaritimo