Market Conditions – April U.S. containerized imports declined 5.5% year-over-year to 2.27 million TEU and were down 3.2% compared to March volumes. However, as we move through the second half of May, we are seeing an increase in new booking activity originating on the trade. In response to softer demand over recent weeks, ocean carriers have significantly increased blank sailings, particularly on the Pacific Southwest (PSW) trade lane, where more than 100,000 TEU of capacity was removed from the market.
This reduction in capacity has placed upward pressure on freight rates, prompting ocean carriers to quickly implement peak season surcharges on long-term fixed-rate contracts well ahead of the traditional peak shipping season. We expect upward rate pressure to continue into June; however, with fewer blank sailings currently projected, those headwinds could begin to ease in the near term. Meanwhile, Phase 1 of the IEEPA refund process is well underway, with many importers expected to begin receiving refund deposits in the coming weeks — at least for certain qualifying goods.
Market Rates – Rising ocean carrier fuel costs were reflected in May 1 pricing across both short- and long-term freight rates. Long-term contract rates are expected to see an additional fuel-related increase effective June 1, varying by carrier but averaging approximately $350–$450 per container.
Short-term market rates also experienced an average increase of 10% on May 15, with another round of increases likely on June 1. In addition, as noted above, ocean carriers implemented peak season surcharges effective May 15, with the likelihood of further surcharge increases on the horizon.
Drayage Fuel Surcharges Rise Sharply – International drayage rates are also being impacted by rising fuel costs, with fuel surcharges increasing by more than 50% in certain U.S. markets. These surcharges are typically applied once delivery orders are issued, generally about one week prior to arrival at the port or rail ramp. Any additional fuel-related charges will be adjusted from the original quotation, as the continued volatility in fuel prices has left many drayage providers with little choice but to pass these increased costs on to shippers.
Capacity Management Expectations – June vessel capacity is expected to increase by approximately 4%, while blank sailings are projected to decline by nearly 50%. Maersk has announced a new seasonal service utilizing smaller 4,400 TEU vessels, operating from Vung Tau, Vietnam and Busan, South Korea to Long Beach, California. The service is expected to launch in mid-June and continue through October. This offering will operate outside of the Gemini Cooperation between Maersk and Hapag-Lloyd and comes in addition to the launch of the WC6 service on June 24. The WC6 service will include port calls in Xiamen, China and Busan, South Korea to Long Beach, California as part of the carriers’ “hub-and-spoke” shuttle network strategy.
Ocean carriers will be closely monitoring the balance between increased capacity and vessel utilization levels, with blank sailings continuing to serve as the primary mechanism to prevent freight rates from weakening if the supply-demand gap widens. With VLSFO and bunker fuel prices remaining above $900 per metric ton, carriers are expected to take aggressive measures to maintain elevated freight rates in order to offset rising operational costs.
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