News / Transpac spot rates crash as pre-tariff demand for US imports from Asia fades

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Container spot freight rates on the transpacific eastbound routes from Asia to the US west and east coasts crashed this week, as demand appeared to fall off a cliff catching out carriers that had reintroduced capacity in the wake of the tariff pause.

“Demand is now more than satisfied on the transpacific, as carriers continue to inject capacity banking on shippers still frontloading for some time in the lead up to the end of the two 90-days pauses ending on 9 July and 14 August respectively,” Xeneta chief analyst Peter Sand told The Loadstar.

“For the first time in over a month, Drewry’s WCI [World Container Index] fell 7% this week, following six weeks of gains, mainly due to the low demand for US-bound cargo,” analysts at Drewry noted.

“It is a sign that the recent surge in imports to the US, which occurred after the temporary halt of higher US tariffs, will fail to have the lasting impact we had initially expected.”

The composite index decline was propelled by a 20% week-on-week drop in the Shanghai-Los Angles spot rates, which shed over $1,200 in the space of seven days, to end at $4,702 per 40ft.

This was accompanied by a 10% week-on-week drop on the WCI’s Shanghai-New York leg, which ended the week at $6,584 per 40ft.

According to the Shanghai Containerised Freight Index (SCFI), the declines were even steeper, with its Shanghai-US west coast base port leg losing 33% week on week, to end at $2,7772 per 40ft, while its Shanghai-US east coast base port leg dropped 21%, to $5,352 per 40ft.

“Capacity outpaced the slowing demand,” Drewry noted, adding: “Cancelled sailings have also declined notably, dropping 60% on the US east coast, from 11 to four, and 64% on the US west coast, from 29 to 10, between June and July.”

Xeneta’s XSI short term index showed a 17% week-on-week drop, to $4,393 per 40ft, on eastbound transpacific shipments.

Source: Xeneta (click to expand)

Mr Sand explained that carrier attempts to force rates further up had now backfired: “Indeed a rapid decline after the first of week of June had carriers enjoying 100% success rate of pushing through GRIs.

“Since then, the stronger shippers – those that procure at mid-low levels – have successfully pushed back on the high ask and ‘implemented’ surcharges.”

As in the initial period after the first tariff announcement, it is very difficult to get an accurate picture of real-time bookings, but one explanation could be that with the 9 July deadline for the tariff pause on non-Chinese exports to the US looming, shippers and forwarders have suspended bookings over fears that containers loaded over the next week could arrive in the US after 9 July, and be subject to the extreme 2 April levels.

Mr Sand added: “The massive rush of cargoes out of China, particularly from mid-May and a few subsequent weeks is now back to ‘normal’.

At this week’s TOC Europe 25 container supply chain conference in Rotterdam, Global Shippers Forum director James Hookham said: “The big growth we have recently seen in transpacific container movements, I think, were time-shifted; faced with the very limited choices a shipper has, it is the right thing to ship goods while there’s a lull.

“All the messaging has been to get the cargo through and beat the 9 July deadline – get the cargo there and get it under bond,” he added.

However, there was good news for carriers on the Asia-Europe trades, the WCI’s Shanghai-Rotterdam leg posting a 12% week-on-week increase, to $3,171 per 40ft, while its Shanghai-Genoa leg was up 1% week on week, to $4,075 per 40ft, “supported by tightening capacity, early peak season demand and lingering congestion”, according to Drewry.

Describing the Asia-Europe trade as an “odd duckling”, Mr Sand told The Loadstar: “Massive demand growth seems buoy the market with rates up 47% from China to North Europe since end May.

“Capacity deployed peaked in May and have fallen back somewhat since then, which gives rates a base to climb from,” he said.

Peter Sundara, Singapore-based head of ocean freight at Australian shipper Visy Logistics, told The Loadstar he expected spot rates to Northern Europe to stabilise during the peak season, while west Mediterranean rates would continue to climb.

“Europe is facing a lot of port congestion and capacity is very limited, and carriers are preparing peak season surcharges for July,” he said.

MSC announced this week it would introduce a new FAK rate for Asia-North Europe shipments of $4,300 per 40ft on 1 July, up from its current rate of $3,900.

Similarly, CMA CGM announced a 1 July Asia-North Europe FAK rate level of $4,100 per 40ft.