Key insights:
- As the Shanghai lockdown continues and worries about closures elsewhere grow, government data released this week showed that manufacturing levels in April were at their lowest levels since early 2020, and that national-wide freight volumes declined 15% compared to last April.
- As demand falls and space becomes available, ocean rates continued to fall this week, with Asia – US West Coast rates falling 19% to $12,596/FEU – their lowest level since July – and Asia - N. Europe rates decreasing 3% to $10,565/FEU, their lowest point since June. This was also partially driven by the elimination of many of the premiums that became common during peak capacity scarcity.
Asia-US rates:
- Asia-US West Coast prices (FBX01 Daily) fell 19% to $12,596/FEU. This rate is 104% higher than the same time last year.
- Asia-US East Coast prices (FBX03 Daily) decreased 7% to $15,973/FEU, and are 144% higher than rates for this week last year.
Analysis
The ongoing lockdown in Shanghai – as well as China’s Labor Day holiday that saw many factories across the country closed over the first half of this week – continued to make exports scarce. Meanwhile, COVID case counts climbed in Beijing and other cities raising the possibility of additional lockdowns.
Government data released this week showed that manufacturing levels in April were at their lowest levels since just after the initial outbreak in 2020, and that national-wide freight volumes declined 15% compared to last April.
Some ocean carriers announced additional blanked sailings for the end of May and into June, including to the US East Coast, but are attributing them to growing delays and congestion instead as opposed to a response to falling demand.
Meanwhile, Robert Khachatryan, CEO of freight forwarder Freight Right reports that – for shippers with goods to ship – transpacific “capacity has improved dramatically. We have no issues finding and booking space from Asia to the US.”
As demand falls and space becomes available, ocean rates continued to fall this week. In addition, the past few weeks has seen the removal of many of the premium surcharges required for securing capacity. As a result, Asia – US West Coast rates dropped 19% to $12,596/FEU – their lowest level since July – and Asia - N. Europe rates decreased 3% to $10,565/FEU, their lowest point since June.
Despite significant cancellations of Shanghai flights, air rates likewise have fallen due to the decrease in demand. Freightos Air Index Shanghai - North Europe rates have fallen 38% since the end of March to $7.37/kg, though this rate is more than triple pre-pandemic norms for this time of year.
The continued lull in ocean volumes will be a welcome chance for destination ports to clear some of the existing backlogs. But longer the lockdown lasts, the larger and the more concerning the coming surge of containers will become for those already-congested ports.
