News / Transpac rates rally, but only capacity cuts can sustain any recovery

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Transpacific rates staged a rally on Friday, ahead of a $1,000 per 40ft container rate hike yesterday.

On Friday, the Shanghai Containerised Freight Index showed the Shanghai-US West Coast rate averaged $1,923 per 40ft, up 17% from the previous week, ending 11 straight weeks of falling rates. The Shanghai-US East Coast rate gained 10% to $2,866 per 40ft.

However, despite next month’s Golden Week holiday in China, rates are unlikely to sustain, unless capacity cuts are made.

The Premier Alliance is withdrawing its fortnightly Pacific South 5 (PS5) service after this week, but this is inadequate to support rates. Linerlytica said in its report this week that rates would resume a downward trajectory in the absence of more capacity reductions.

The consultancy said: “The market continues to be in a stand-off, with the planned September rate hikes not expected to hold as carriers shift their focus to filling their excess vessel capacity and building cargo roll pools ahead of the Golden Week holidays.”

The last PS5 sailing will be made by the 4,992 teu NYK Constellation from Ningbo on 8 September. PS5 was an ad hoc service launched in June as US importers front-loaded to beat tariffs on Chinese goods. It connected Qingdao and Ningbo with Long Beach, using three 4,600-4,900 teu ships, meaning a removal of only around 15,000 teu of the 5.5m teu of transpacific capacity.

However, Sea-Intelligence said in a recent report that there could be a likely wave of eleventh-hour blanked sailings. Sea-Intelligence noted that currently, for Golden Week, carriers expected to reduce only around 4% of Asia-USWC and 5% of Asia-USEC sailings. This compares with 15% and 12% last year, and 9% and 11% pre-Covid.