News / Transpac rates hold firm as capacity is diverted to Asia-Europe lanes

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As US-China trade tension continues, mainline operators continue to divert capacity from the transpacific to Asia-North Europe services, which is driving down rates on the latter tradelane.

Consultancy Linerlytica calculates that 8.6% of Far East-US west coast capacity was removed in the month following the US imposing new tariffs on imports from China of 156%.

Twenty-seven ships, some 200,000 teu, have been removed from the US west coast trade, the bulk of this surplus tonnage redeployed to Asia-North Europe and Asia-Mediterranean routes.

On Friday, the Shanghai Containerised Freight Index showed the Shanghai-North Europe rate down 5% on the previous week, averaging $1,200 per teu, and down 48% year on year.

Linerlytica says in its report today: “The additional capacity shifted from the US routes has not helped the market, with volumes negatively affected by the Labour Day holidays in most parts of Asia. The shifting of excess ships from US to Europe had a detrimental impact on Asia-Europe freight rates, with more downward pressure expected as more capacity shifts away from the US in the next three weeks.”

And now MSC has withdrawn another transpacific service, the Orient, that called at Qingdao, Ningbo, Shanghai, Long Beach, Oakland, Busan, and Qingdao, using up to six ships of between 8,000 and 15,000 teu. The final sailing was made by the 11,037 teu Cape Kortia from Busan on Friday.

Meanwhile, transpacific rates continued to firm as carriers persisted with their rate hikes for this month, propped up by blanked sailings.

The Shanghai-US west coast rate rose 6%, to $2,272 per 40ft, while the Shanghai-US east coast rate remained steady, at $3,282 per 40ft.

The swift removal of excess capacity to the US west coast, following plunging demand out of China, helped relieve some market pressure, but it is the expectation of an imminent China-US trade deal that is keeping market rates up.

US president Donald Trump said on Sunday that he would reduce tariffs on imports from China “at some point”, and while he does not plan to speak with his China counterpart, Xi Jinping, yet, White House officials are talking to his representatives “on various topics”.

But Linerlytica warned: “Cracks are starting to show, as some carriers have rolled back the May gains as capacity utilisation remains weak; with the carriers unwilling to pull out more capacity in anticipation of a potential demand surge.”