This week's key updates in the international freight markets include:

1. A major US rail workers strike set for Friday threatens to make East Coast port congestion even worse and create backlogs across the country.

2. Transpacific ocean rates continued to fall this week, and carriers are announcing blanked sailings through October in response.

3. The latest National Retail Federation data show that monthly import volumes will continue to decline gradually through the end of the year, but even so monthly volumes will be at least 12% higher than in 2019, and total import volumes for 2022 would set a new annual record.

4. Transatlantic rates – that had climbed or stayed elevated while other lanes decreased this year and are now more than 1.5X more expensive than Asia – US West Coast rates – have dipped 20% so far this month, possibly a sign that carriers are shifting capacity to this more lucrative lane.

Asia-US rates:

• Asia-US West Coast prices (FBX01 Daily) fell 10% to $3,896/FEU. This rate is 80% lower than the same time last year.

• Asia-US East Coast prices (FBX03 Daily) dipped 2% to $8,553/FEU, and are 61% lower than rates for this week last year.

Analysis

Transpacific ocean spot rates continued their decline this week on weakening demand for ocean freight. At $3,896/FEU, Asia – US West Coast rates have fallen by nearly 75% since the start of the year and are at their lowest level since May of 2020. The significant shift of volumes – and congestion – to the East Coast has kept Asia – US East Coast prices from falling as dramatically, with rates “only” half their level at the start of the year and even with prices in May of 2021.

In response to easing demand and falling rates, carriers are canceling some transpacific sailings through October. And as spot rates are now well below most contract rates, there are reports that many importers are trying to renegotiate ocean contracts with carriers.

The latest National Retail Federation data show that monthly import volumes have indeed declined each month since May and estimate that the gradual slide will continue through the end of the year, representing a 2% to 5% decrease compared to last year for each of these remaining months.

But even with these decreases, projected volumes for each month from September to December are at least 12% higher than in 2019, and total import volumes for 2022 would surpass 2021 by 1.2% and set a new annual record. Which is to say that despite these declines, volumes are still quite strong (and rates are still quite high) compared to 2019.

Another indication of an ocean market in flux is the recent rate decrease on the transatlantic. This lane had been anomalous – climbing early this year as Asia – Europe rates fell, and staying elevated this summer as transpacific prices sagged. But since the start of the month Europe – N. America rates have fallen nearly 20%.

This dip could reflect the impact of the broader market forces that are pushing down demand on other lanes finally reaching this lane too. But, with transatlantic spot rates now significantly higher than Asia – US West Coast prices ($6,800/FEU vs. $3,900/FEU), and a surplus of West Coast capacity as demand drops and congestion eases there, some of this month’s transatlantic decrease could be due to carriers shifting some capacity to this more lucrative lane.

But aside from the macroeconomic forces at play pushing prices down and reducing congestion in some areas, weather, like the latest typhoon that will shut down ports at Shanghai and Ningbo, and labor issues are still potential disruptors to this recovery.

In the US a major strike by two important railroad worker unions has been planned for Friday, and looks likely to take place despite government efforts to broker an agreement. The rail strike would make congestion at East Coast ports already struggling with rail volumes even worse and could create new widespread backlogs, including at LA/Long Beach.

In the UK, a second strike by port workers in Felixstowe has been announced for September 19th, coinciding with a strike planned at the port of Liverpool.