Spot rates for forty-foot containers moving from China to North America's East and West Coasts are climbing again after falling through most of July, with the West Coast lane up $1,328 and the East Coast lane up roughly $413 since the end of July, according to FreightWaves data from the FreightosBaltic Daily Index (SONAR: FBXD.CNAW, FBXD.CNAE) as of August 13.
Demand is not the primary driver
The rate increases are not being driven by demand. Bookings of twenty-foot equivalent units (TEUs) from China to the U.S. were down 4% year over year through the first two weeks of August, while spot rates from China to the North American West Coast were nearly triple what they were at this point last year, FreightWaves reported. The data suggests the increase — and continued elevation — in rates is being driven by supply rather than demand.
Spot rates have been increasing since the war with Iran began in late February, and they rose the most in early and mid-June on expectations of a strong peak season. Soaring fuel costs have also been cited as a reason, but those costs have declined since May.
General rate increases and shipper pushback
Maritime carriers typically institute general rate increases (GRIs) around the first and fifteenth of certain months, when conditions are expected to change or have already changed. Not all of these increases succeed: shippers pull back on their orders when rates rise, an effect observed after the July 1 increase, according to FreightWaves.
| Lane | Rate change since end of July | Year-over-year comparison |
|---|---|---|
| China to North America East Coast (CNAE) | Up roughly $413 | Not specified |
| China to North America West Coast (CNAW) | Up $1,328 | Nearly triple year-ago level |
Super El Niño disrupts southern China ports
Weather has also been cited as a factor disrupting port activity in southern China since July. The eastern Pacific is currently in a strong, or "super," El Niño cycle, which typically leads to a more active tropical storm season in the western Pacific. So far this year there have been 16 named storms, making it the most active season by this point since 1971, FreightWaves reported.
Typhoons Noul and Dolphin both made landfall in mainland China over the past month, with the ports of Shanghai, Ningbo and Shenzhen all reporting congestion as carriers skipped calls. Dolphin was the third tropical storm to hit China's east coast in a five-week period, leading to 2.4 million TEUs being stranded and further exacerbating port congestion.
Panama Canal draft restrictions return
El Niño's effects are also being felt in the Atlantic. Cooler Atlantic Ocean temperatures typically mean less tropical activity, but also less rainfall throughout the Caribbean and Central America. That is affecting the Panama Canal, which is once again experiencing drought-like conditions. The Panama Canal Authority just issued draft restrictions for cargo vessels effective into September, limiting how deeply — and therefore how heavily — vessels can be loaded when transiting the canal, according to FreightWaves. This does not appear to be driving rates higher at this point, but it is worth watching.
Peak season outlook: extended, not spiked
The National Retail Federation recently revised its outlook, now expecting import demand to stay elevated through September rather than dropping off sharply after an early July peak, citing continued strength in orders and relatively low inventory levels among its members, FreightWaves reported. Customs data shows imports began clearing ports earlier than usual, in April and May, with a more even, extended cadence heading into August.
Watch list
- Panama Canal draft restrictions effective into September could tighten vessel loadings if drought conditions persist.
- Further El Niño-driven typhoons could prolong congestion at Shanghai, Ningbo and Shenzhen.
- Carrier GRIs around the first and fifteenth of the month may face renewed shipper pushback, as happened after July 1.
- The ongoing Iran conflict since late February continues to influence East Coast rate movements.
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