Despite Record Import Volumes, Eastbound Pacific Spot Rates Remain Stagnant

Posted on: Aug 16, 2017

Despite record import volumes flowing through major US ports, container lines have failed to lift eastbound Pacific spot rates straight, although a forecast for accelerating Asia imports this month could propel prices in the coming weeks.
 
The spot rate for shipping a 40-foot container from Shanghai to the East Coast last week was $2,620, down 2 percent from $2,661 the week prior. The West Coast rate was $1,641 per FEU, down 1 percent from the week prior, according to the Shanghai Containerized Freight Index.
 
Year-over-year spot-rate increases are still up on double-digits, with the East Coast rate 48 percent higher and the West Coast rate 31 percent pricier. The gap with last year's rates will begin to diminish in early September. Hanjin Shipping filed for bankruptcy protection on Aug. 31, 2016, and with its departure, capacity in the Pacific decreased about 7 percent. Spot rates the following week spiked 45 percent to the East Coast to $2,441 per FEU, and 51 percent to the West Coast to $1,746 per FEU.
 
Announcements this week from West Coast ports revealed some unusually strong import numbers. Long Beach in July reported its busiest month ever, with imports up 13.1 percent from July 2016. Los Angeles had its busiest July ever, with imports 13 percent higher year over year. Oakland reported its highest monthly import volume ever, up 5.4 percent from July 2016, at a port where exports usually exceed imports.
 
US imports in August could set records. Global Port Tracker, which is published monthly by the National Retail Federation and Hackett Associates, forecasts that August will be the busiest month ever, with imports predicted to rise 2.1 percent from August 2016.
 
Nevertheless, spot rates in the eastbound Pacific have been stuck in a narrow range this summer. One reason could be that carriers are increasing their peak-season capacity by operating "extra-loader" vessels. This is the case in the Asia-Europe trade, where at least two carriers entered extra-loader ships. Rates in that trade lane have likewise been stagnant this peak season. CMA CGM is deploying extra-loader vessels in its Asia-US Gulf and South Atlantic services.
 
Peak-season capacity to both coasts will be higher this year. David Arsenault, president of Logistics Transformation Solutions, projects that West Coast capacity will increase 4.9 percent, concentrated mostly in Los Angeles-Long Beach, and East Coast capacity will be 2.1 percent higher compared with peak season 2016. Carriers deploy their largest vessels to Los Angeles-Long Beach, and independent carriers have concentrated most of their trans-Pacific capacity to Southern California.
 
 
Source: Journal of Commerce