Market Letters

Transpacific Eastbound Market Update – Week 32, 2023

Market conditions – The carriers’ strategic withdrawal of capacity through blank sailings, mergers, and service cancellations, which amounted to almost 25% of Transpacific capacity, has yielded successful results, with freight rates surging by a similar percentage since June. Looking ahead, we anticipate this disciplined approach to deployed capacity to persist throughout the peak season, as ocean carriers try to maintain compensatory rate levels for the remainder of 2023, or at least until October.

The Canadian ILWU strike, combined with canceled and blank services in the PSW trade, has significantly increased vessel utilization levels, causing new bookings to be delayed by 2-4 weeks from their August ready dates to West Coast and U.S. IPI destinations. Meanwhile, utilization levels to the Gulf and East Coast are also on the rise; however, there is comparatively more available space, and most lanes still offer lead times of under two weeks.

Market rates – Import container costs have been steadily rising since June 1st. However, the last successful rate increase on August 1st caught some shippers off guard because market indicators did not necessarily reflect a surge of imports during this peak shipping season. The sudden shift in discretionary cargo from Canadian ports to USWC ports, along with the approximately 15% of TPE trade capacity cut through blank sailings and service suspensions, has rapidly narrowed the gap between supply and demand, leading to a spike in freight rates. We anticipate that ocean carriers will continue to actively manage capacity during the peak season, which will likely keep upward pressure on market rates throughout this period.

Peak Season Surcharge – Ocean carriers have recently announced peak season surcharges, which range from $400 to $800 per 40' container, depending on the carrier and sub-trade. These surcharges will take effect between August 15th and September 1st. CMA and ONE will execute their surcharge on August 15th, with no specified expiration date at this time.

A PSS of $400 will keep long-term fixed rates hovering around the market levels seen in early August. However, there's another GRI scheduled for August 15th, and if it proves successful, long-term fixed rates could comfortably fall below current market rates. The sustainability of market rates will play a crucial role in deciding the viability of the surcharge. In the past, all peak season surcharges have usually been dropped in the market by the end of October.

ILWU Canada Strike – The industry was taken by surprise by the 14-day ILWU Canada longshoreman strike which caused significant disruptions in the trade and led many ocean carriers to cancel or blank sailings into the PNW until August. However, there's good news as both parties are actively seeking ratification of the new brokered contract agreement, unveiled on Sunday evening, July 30th. This progress means that ocean carriers will soon begin normalizing sailings in the short-term. For instance, COSCO has already announced an extra-loader sailing into PNW-Canada in mid-August, and we expect other carriers to follow suit as congestion concerns ease. The timing of this is indeed certainly welcome, especially since some ocean carriers were considering limiting U.S. IPI cargo via U.S. West Coast ports due to higher vessel utilization numbers resulting from the strike.

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