Optimism abounds transpac rates will enjoy peak season rebound

Release date: 2019-12-24
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Optimism abounds transpac rates will enjoy peak season rebound

THE Shanghai Shipping Exchange?s China Containerised Freight Index (CCFI) shows that US destination trade lanes posted the strongest weekly growth, with the west coast spot rates up 3.9 per cent April 20 compared to the previous week, and east coast rates are up 4.6 per cent.

Stifel analyst Benjamin Nolan noted that year to date, charter rates for 9,000-TEUers were up 29 per cent, for 4,400-TEUers were up three per cent, and for 2,000-TEUers they were up 40 per cent year on year.

Mr Nolan wrote that with only one per cent of the global containership fleet idle, rates are poised to respond quickly to an uptick in volume once the summer peak season commences, reported New York's FreightWaves.

'Unfortunately, there could be lower container demand growth due to the tariffs imposed by both China and the US which could become a long-term headwind for the space, but should have little to no impact in the near term,' Mr Nolan commented.

The American Association of Port Authorities (PA) wrote an open letter to US Trade Representative Robert Lighthizer regarding their concerns about the potentially damaging effects tariffs could have on international trade and port traffic.
'We support and encourage steps focused on expanding exports rather than creating new import restrictions,' said the PA. 'With today's worldwide supply chain, American manufacturers, farmers and businesses often rely on ports to handle the raw materials and semi-finished components needed for production here in the United States.'

Chinese manufacturers have been adding shifts and working overtime to transport products to the US before the tariffs hit. Cixin, a ball bearing manufacturer in Ningbo, is mulling over plans to rush shipments of its products to the United States, which accounts for 30 per cent of its exports, before steel tariffs take effect.

The container shipping industry is still working through some extra supply from a capacity glut that dragged down rates in the latter half of 2015 and kept them down through the majority of last year but, judging from container fleets' orderbooks, new capacity will be slow to come online for the remainder of this year and will slow further in 2019.

The increase in oil prices will ultimately push up bunker fuel costs, but as supply and demand is slowly returning to equilibrium, fuel prices are not expected to move container rates.

'Global trade is healthy, fleet utilisation is tight and supply is not excessive. However, with an influx of near-term deliveries and box rates still unimpressive, we expect it could continue to take time for shipping rates to catch up,' Mr Nolan said.

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