Analysts: Spot Rate Decline Indicates Less Demand for Shipping US-Bound Containers
Although potential reciprocal tariff increases have been pushed back to Aug. 1, ocean spot rates between Asia and the U.S. West Coast have been falling, suggesting a relaxation in demand for shipping containers, according to two companies tracking ocean rates.
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Norway-based Xenata, a platform covering ocean freight rates, calculated that the average ocean spot rate into the U.S. West Coast peaked on June 1 and has fallen 58% since then, while the spot rate into the U.S. East Coast has fallen 35% over that same period.
“Sentiment has turned and rates are falling despite the higher US-China tariffs still being on hold and the deadline for the rest of the world extended into August," Emily Stausboll, Xeneta senior shipping analyst, said in a July 18 release.
“Shippers can’t frontload forever, no matter what happens with the tariffs, so the longer term direction for rates was always going to be downward," she continued. She also said the downward pressure on rates appears to be a global phenomenon.
Sea-Intelligence, which has offices in Singapore, Denmark and Hong Kong, also noted in a July 11 release a drawdown in container demand to the U.S.
"It was initially expected that the tariff pause would push the traditional August peak season into June/July, with US importers trying to get volumes in before the tariff pause ends," Sea-Intelligence CEO Alan Murphy said. "However, during June, the US importers pulled back somewhat, seemingly in response to uncertainty regarding the future regulatory environment. This reduction in container demand, combined with the injection of capacity has led to plummeting spot rates."
Ocean carriers had planned to inject 770,000 twenty-foot equivalent units into the market for June and July, Murphy said. But as of July 4, this capacity was reduced to 590,000 TEUs.
"In other words, over the month of June, shipping lines removed 23% of the planned capacity injection on Asia-NAWC, in response to importers suddenly reversing their position away from a sharp front-loading of Chinese cargo," Murphy said.