Container shipping spot rates in the Asia-U.S. trade have halted their ascent after rising double digits since late June. Several spot-rate indexes are now showing a retreat from recent highs.

Spot rates still remain relatively healthy — above pre-COVID spot rates and current contract rates — and it’s too early to know whether this is the start of a pronounced reversal or just a temporary setback.

But recent rate action further undermines hopes that the goods inventory overhang amassed during the pandemic has wound down and restocking will lead to a better-than-normal peak season. 

The current trans-Pacific peak season remains unexceptional, neither very good nor very bad. There’s no restocking surge yet. Demand over the latest week was “faltering” and “muted,” causing freight markets “to trend largely downward,” said price-reporting agency Platts on Monday.

WCI Asia-West Coast index declines

The Drewry World Container Index (WCI) Shanghai-Los Angeles spot assessment fell 5% in the week ending Thursday versus the prior week, to $2,240 per forty-foot equivalent unit. The index was flat the week before after rising continuously since June 29.

The complication in comparing current rates to the pre-pandemic “normal” is that both 2018 and 2019 featured their own abnormalities, courtesy of the Trump administration’s tariffs on Chinese goods.

U.S. importers brought forward shipments to avoid tariffs, pushing up spot rates in the second half of 2018 and creating an inventory overhang that weighed rates in the second half of 2019.

The latest WCI Shanghai-Los Angeles assessment was 6% above where it was at this time in 2018 and 33% above 2019. Barring a swing back upward in the coming weeks, 2023 spot rates will soon drop below 2018 levels — while still having a long way to fall before reaching 2019 levels — as a result of the earlier tariff effects.

No canal effect yet on WCI Asia-East Coast index

The WCI Shanghai-New York spot index fell for the second week in a row, to $3,425 per FEU in the week ending Thursday. That was flat versus 2018 and 22% above 2019.

Despite rising fears that Panama Canal water restrictions will impact U.S. supply chains, there has been no spot-rate effect yet in the Asia-East Coast trade.

Canal draft restrictions are forcing carriers to limit loadings aboard Neopanamax container ships, reducing available capacity, which should theoretically put upward pressure on spot rates. Not only have spot rates in this lane declined in recent weeks, but Asia-West Coast rates rose faster than Asia-East Coast rates in July and the first half of August.

FBX indexes flatline, Platts indexes pull back

The Freightos Baltic Daily Index (FBX) for China to the West Coast surged by 71% between the end of July and Aug. 17. It has flatlined since Aug. 18, and was at $2,103 per FEU on Friday.

The FBX China-East Coast index rose 40% between the end of July and Aug. 17. It has also remained effectively unchanged since Aug. 18, at $3,083 per FEU on Friday.

Platts’ North Asia-West Coast index was at $1,850 per FEU on Friday, down 14% from its recent peak on Aug. 16.

Platts’ North Asia-East Coast assessment came in at $3,025 per FEU, down 4% from mid-August.

Xeneta: Spot rates vs. contract rates

The good news for ocean carriers is that trans-Pacific spot rates remain above average annual contract rates.

Xeneta tracks both short-term (spot) and long-term (contract) rates. As of Monday, Xeneta put average short-term rates in the Far East-West Coast trade at $2,135 per FEU. That’s down 3% from the recent high on Aug. 15. But current short-term rates are still up 66% from the recent low on June 28, and they’re 22% above Xeneta’s average long-term rate assessment for Monday.

Xeneta assessed Monday’s short-term rate in the Far East-East Coast trade at $3,194 per FEU, down 3% from the recent high on Aug. 15, up 44% from the recent low for short-term rates on June 28, and 18% above current average long-term rates.

Average long-term rates in May can be viewed as a proxy for “close to breakeven” in the trans-Pacific, as multiple carriers stated that they refused to sign annual trans-Pacific contracts that run from May 1-April 30 at levels that would lock in losses.

Xeneta’s current spot-rate assessments for the trans-Pacific are roughly in line with May contract-rate levels, implying that carriers are now in the vicinity of breakeven.

If spot rates continue to fall, it would put carriers back in the black in the trans-Pacific, with Zim (NYSE: ZIM) particularly exposed.

Zim, which operates in the Asia-East Coast lane, refused to sign trans-Pacific contracts below a minimum rate threshold, pushing its spot exposure on this lane to an unusually high 70%. That bet paid off in July and August as spot rates rose, but would turn negative if spot rates fall from current levels.

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