To Our Valued Customers:
Market Conditions – Tight capacity continues on most trades with conditions improving as we move through July. PPE products continue to ship in large volumes and expectations are for continued strong US consumer demand for the foreseeable future. The unexpected increase in volumes were also driven by the potential expiration of tariff exclusions under List 3 that are set to expire on August 7th, 2020. We anticipate that East Coast volumes potentially will slow first since the window to clear prior to August 7th will close after the first week of July. West Coast service can continue to see strong volumes through July 12th as importers look to avoid a potential tariff increase.
Market Rates – The 3rd general rate increase within a month period went into effect today July 1st at varying levels in the market place. Rates are near record highs with West Coast levels exceeding $3000 per 40’ and inland rail destinations near $5000 per 40’! We feel the “high water mark” have been reached and rates should drop off as we move through the month. Capacity is being effectively managed by ocean carriers and with export volumes and rate levels near rock bottom, imports will continue to carry the burden of the roundtrip cost.
Peak Season Surcharge Effective July 1st – Ocean carriers implemented peak season surcharges to importers and forwarders alike effective today July 1st at varying levels up to $1000 per 40’ container. The rate gap after the peak season surcharge was implemented is still significant versus market and reason a great deal of importers is accepting the increase to maintain allocations. The strength of the market and how quickly carriers will react if volumes start dropping off will determine how long the peak season surcharge will remain in the market. We can easily see the surcharge dropping off or being mitigated overtime before spiking again later this year or before Chinese New Year. Many variables as we move through the remainder of the summer with COVID & tariffs creating the volatility to keep everyone guessing in the market place. Did anyone see a $3000 per 40’ West Coast rate even two months ago? Stay tuned...
Blank Sailing Disappearing Act – The lack of July and August announced blank sailings represent the current strength in the market place. After THE Alliance initially announced several blank sailings through July, THE Alliance quickly reinstated the sailings as demand improved and the other alliances kept their steel in the water while even announcing additional extra loaders due to strong demand and favorable freight rates.
3rd Quarter Container Forecasts – As ocean carriers request 3rd quarter container volume forecasts to avoid a repeat of what we see in today’s market, it’s doubtful any vast improvements will be recognized for the foreseeable future. The market is shifting towards a “just in time” environment as PPE projects along with e-commerce demand on specific products are difficult to predict volatility looks to be the safe bet for the remainder of 2020. The muddy forecast will force ocean carriers to be conservative with capacity and supplement unforeseen spikes in demand with extra loaders as necessary. This is a recipe that will create higher than expected market rates with peaks and valleys along the way.