If Hunter S. Thompson had written about supply chain, we might have “Fear and Uncertainty in Ocean Shipping.” He didn’t, but we do. And the supply chain is trying to cope.
Container rates on the Asia-U.S. trade are surging during the pause in the China-U.S. tariff tiff as carriers press for higher prices and gauge shippers’ desperation.
“Fear and uncertainty is a powerful force in global supply chains and we are seeing this clearly as shippers fight to get their goods moving after the temporary lowering of U.S.-China tariffs – and they are willing to pay higher rates to do so,” said Peter Sand, Xeneta chief analyst, in a note.
For the week that ended on Friday, Xeneta data showed market average spot rates from the Far East to U.S. West Coast at $3,000 per forty-foot equivalent unit from $2,722 the previous week, and $4,069 per FEU for Far East to U.S. East Coast, up from $3,883 for the week of May 16.
“Carriers are pushing for big spot rate increases on trades from China to the U.S. on June 1 and shippers are once again being offered ‘Diamond Tier’ services to guarantee space on ships,” Sand said. “How successful carriers are in getting these rates will be determined by how much shippers are willing to push back.”
For what Xeneta terms mid-high spot rates as paid by shippers in the 75th percentile of the market, Far East to U.S. West Coast was $3,200 per FEU, up from $3,012 the previous week; Far East to U.S. East Coast came in a $4,250 per FEU, from $4,050.
Sand noted a squeeze after carriers reduced capacity amid falling demand during the period of 145% tariffs, but he urged shippers to question the severity when negotiating rates.
“Are these rate increases being driven by a squeeze in capacity or fear in the market? Likely a combination of both,” he said. “In the defense of carriers, it does take time to shift capacity back to the China-U.S. trades, so spot rates will peak in the first half of June before softening later in the month.”
Find more articles by Stuart Chirls here.
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