Uncertainty continues to reign supreme in the shipping market, but the prospect of a fair deal between China and the US is now looking a bit more realistic.
Beijing’s openness to dialogue meant that Asian stock markets ended the week on a high note, with the Tokyo and Hong Kong stock exchanges up 1.2% and 1.7% respectively.
While diplomats are working to solve trade relation issues, and negotiations between the US and the EU are progressing towards a settlement, last Thursday ocean container freight rates registered yet another percentage drop on the previous week, levelling, Drewry data in hand, at an average of $2091 per forty-foot container.
Shanghai – Rotterdam freight rates -5% on the previous week, to $2202 per FEU, and Rotterdam – Shanghai and Shanghai – Genoa tariffs, which both fell by 4%, to $464 and $2889 per FEU respectively, registered the biggest downturns.
Rates on the transpacific trade routes, which have been hit harder than others by the trade war, also fell. Shanghai – New York connecting services were down 3%, to $3,500, while Shanghai – Los Angeles tariffs dropped 1%, to $2,590.
In its latest market report, Clarksons pointed out that if the trade war continues for another three months before the two countries reach some kind of agreement, the main trans-Pacific trade flows could even drop by 10% over the whole year.
According to the brokerage agency, the slowdown in global economic activity, which, since May 2nd, also affects e-commerce – violently impacted by the abolition of the de minimis for exports from China and Hong Kong to the US – could directly result in curbing container trade growth altogether.
Meanwhile, the big carriers are trying to run for cover. Over the last few days, they have announced massive blanked sailings on transpacific trade lanes. Sea Intelligence’s analysis reveals a huge number of departure cancellations on these routes for week 19, which starts today. If, prior to April 7th (i.e. week no. 15) cancellations amounting to 35% of the scheduled capacity had been planned for the 5th -11th May period, from week no. 16 (14th -20th April) the total cancellations scheduled for week no. 19 rose to 42% of the capacity available, i.e. an increase of 7 percentage points on a weekly basis.
Analysing the data, it is clear that the trade war has led many freight forwarders to suspend or even cancel their shipments. This in turn has reduced demand for containerized goods, forcing carriers to cancel departures.
The cancellation of sailings could clearly positively impact the stability of transport tariffs, but all eyes remain focused on US-China relations and what will happen in the coming weeks. Undoubtedly, the prospect of a new Phase-One Deal after the one signed between the two countries in the pre-pandemic period could be the starting point for relaunching maritime traffic, pushing freight rates up.
Carriers know this and some have already begun to bet on the trade war terminating rapidly, to the extent that they have announced new Peak Season Surcharges for early June in anticipation of a strong upturn in cargo bookings from China to the US.
Hapag Lloyd, for instance, has decided to introduce a new $1,000 per 20ft container surcharge as of 1st June for shipments from East Asia to North America, while Maersk has announced a $2,000-2,500 per container surcharge for shipments from the Middle East and the Indian Subcontinent to the east coast of the US and Canada.
According to Linerlytica, shipping companies are continuing to raise tariffs in spite of the reduction in Chinese cargo flows to the US. It points out that the downturn in traffic volumes has been so severe that it has forced carriers to reduce their available capacity on the transpacific trade by 20%.
The market analyst believes that the reduction in traffic flows could become so dramatic in May that de-risking measures are urgently needed to facilitate a definitive agreement between the two countries, giving a new impetus to traffic flows.
Translation by Giles Foster
