News / Declining Asian exports another blow to transpac contract hopes

Port of Shanghai © Anekoho Dreamstime.com

China’s May Day holiday, lasting five days from Saturday, will delay liner operators’ planned rate increases, and cargo volumes ex-Asia have dipped below expectations, further hampering contract negotiations with transpacific shippers.

Shipping line hopes were raised on 14 April, when the Shanghai Containerised Freight Index showed Asia-US west coast rates had hit a five-month high of $1,668 per feu, capping four consecutive weeks of increases.

The Asia-US east coast rate had also risen, by nearly 20% from 7 April, to $2,565/feu, however, last Friday, both rates dipped 2%, to $1,633 for Asia-USWC and $2,510 for USEC.

Linerlytica noted that while capacity utilisation on both lanes had been “decent”, as a result of blanked sailings, the May Day holiday in China is expected to affect cargo volumes, especially as capacity is higher than during the lunar new year break.

It has been estimated that at least 440,000 teu of capacity has been blanked this month.

The consultancy noted that, despite box line optimism that Pacific contracts could be finalised this month, a significant number of contracts remain in the balance, with just five days to go before new agreements are due to begin.

“Negotiations with NVOCCs are particularly problematic for carriers, given the recent rate volatility,” said Linerlytica. “Some have extended preferential NVOCC rates to the end of June, as the share of contract volumes has shrunk to less than 30%.”

Korea Ocean Business Corp’s composite container index painted a rosier picture, however, with the South Korea-USWC rates at $1,568/feu and to east coast ports at $2,507/feu on 24 April, up 18% and 12%  respectively from 17 April.

However, a South Korean forwarder told The Loadstar: “Box lines are striving to keep the freight direction up by adjusting slot availability and maintaining freight rates, because the volume of goods being moved has significantly decreased. They must keep spot rates high to justify shippers paying slightly higher contract rates.”

Trade database Descartes Datamyne shows demand has been sluggish for a long time, with Asia-US volumes declining by double digits for seven consecutive months. Its statistics show that last month, container traffic from 10 Asian countries to North America decreased 32%, year on year, to only 1.22m teu.

China, the largest exporter of consumer goods, shipped 646,000 teu to North America in March, 37% less than the previous year, while South Korea, the second-largest, saw its volumes drop 17% year on year, to 162,000 teu.

Vietnam, which has been growing as a manufacturing centre at China’s expense, saw a 31% decrease in its March exports to North America, at 105,000 teu, and Taiwan exported 65,000 teu, down 33% from a year ago.