Trans-Pacific Spots Rates Dip Despite Capacity Cuts

Posted on: Aug 18, 2016

Trans-Pacific spot rates slipped again this week as weak demand and overcapacity keep them under downward pressure. The rate for shipping a 40-foot-equivalent unit from Shanghai to the U.S. West Coast was $1,225, down 4 percent from last week and 29 percent year-over-year, while the rate to the East Coast was $1,768 per FEU, down 6 percent week-over-week and 44 percent year-over-year, according to the latest reading from the Shanghai Shipping Exchange.

While overcapacity has been blamed for historically low spot and contract container shipping rates, weak demand has also been a critical factor. IHS economist Mario Moreno recently downgraded his outlook for U.S. import growth this year to 4.5 percent from his earlier forecast of 5.7 percent. Although depressed, trans-Pacific spot rates are still higher than they were in the spring, when they were about $1,500 per FEU to the East Coast and $800 to the West Coast. This is due in part to capacity reductions that have driven up vessel utilization rates.

Source: JOC