Coronavirus pushes US importers to non-Chinese Asian sources

As the coronavirus fallout deepens, all eyes are on the China-to-U.S. trans-Pacific route.

According to Eytan Buchman, chief marketing officer of Freightos, “Many provinces and cities in China have extended the [Chinese New Year holiday] shutdown, some even until March 1. Highway and transportation closures, and mandatory 14-day quarantines for people returning home from strongly affected areas, mean that even in places no longer shut down, the return to normal at factories and ports will be slow.

“In terms of rates, with minimal manufacturing and cargo to ship, demand has dipped below what was expected for post-Chinese New Year,” said Buchman, who noted that Chinese-U.S. rates “have so far remained unchanged from their pre-holiday and pre-outbreak levels.”

He believes China-U.S. rates “may start to fall … in the short term as the shutdown drags on,” but when “production does pick up in full force — possibly not until mid-March — the spiking demand and reduced number of ships in the region will push freight prices up.”

Freightos provides an index (SONAR: FBDXD.CNAW) that tracks the daily change in the price to ship a forty-foot equivalent unit (FEU) container from China to West Coast ports such as Los Angeles and Long Beach.

Looking at this index over a three-year period, the current rate is just under $1,500/FEU, roughly the same level it was two years ago. The outlier in the three-year data series is the period from August 2018 to February 2019, when rates were artificially elevated as U.S. importers brought cargoes forward to beat real or perceived tariff deadlines.

While not seen in the trans-Pacific rates, the coronavirus effect is being felt in Asian sourcing markets, according to Freightos.

Buchman said, “Freightos.com’s marketplace data suggest that among U.S. importers, coronavirus has intensified a trend that was started by the trade war: Importers are increasingly looking for regional suppliers other than China. The share of searches for countries other than China has climbed to more than 17% so far this month, up from less than 8% a year ago.”