Weekly highlights

Ocean rates – Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) increased 9% to $1,672/FEU.
• Asia-US East Coast prices (FBX03 Weekly) increased 3% to $2,667/FEU.
• Asia-N. Europe prices (FBX11 Weekly) climbed 31% to $1,655/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) increased 18% to $2,345/FEU.

Air rates – Freightos Air index

• China – N. America weekly prices decreased 12% to $3.48/kg
• China – N. Europe weekly prices increased 2% to $3.14/kg.
• N. Europe – N. America weekly prices fell 6% to $1.69/kg.

Analysis

August General Rate Increases (GRI) pushed ex-Asia ocean rates up sharply to start the month on a combination of demand rebounds and stricter capacity reductions by carriers. 

Transpacific weekly average rates increased to $1,672/FEU to the West Coast last week, and $2,677/FEU to the East Coast. But West Coast prices have climbed to $1,900/FEU so far this week, a 44% increase compared to mid-July and 23% higher than in 2019. East Coast rates reached $2,883/FEU yesterday, a 20% increase since mid-July and 2% higher than in 2019. 

These price increases are partly driven by some demand recovery. 

National Retail Federation US ocean import data estimates that July volumes increased 4% compared to June. And though July numbers would be 3% lower than in 2019, imports are projected to increase in August and remain elevated through October – in line with typical seasonality and 3-6% above 2019 levels. Based on projections through December, total 2023 volumes would show 3% growth relative to 2019, slightly below the 2012 – 2019 average annual growth rate of 4.2%.

But even as peak season gets underway, carriers are having to reduce capacity in order to get rates to climb, reflecting the generally over-supplied state of the market as fleet sizes continue to grow.   

Another factor for Asia – US East Coast rates is the low water level in the Panama Canal. Though some surcharges and restrictions have been in place since June without significant impacts on rates or operations, the first reports of congestion and a ship having to offload containers before entering the canal this week point to the potential for this situation to cause disruptions.

Asia – Europe GRIs pushed ocean rates to $1,655/FEU last week and up to $1,782/FEU so far this week, a 37% increase on July and 28% higher than in 2019. This lane has seen moderate volume growth in the last few months with June imports 3% higher than last year. But like on the transpacific, the rate climb is only likely to stick if accompanied by significant and sustained capacity reductions. 

Asia – Mediterranean demand remains particularly strong, and has been the driver of rates remaining above 2019 levels this year even as prices fell on other trade lanes.  As carriers added capacity to the lane prices fell about 17% in July from the elevated level of about $2,400/FEU it had sustained since April, but a GRI last week has pushed prices back up to $2,423/FEU this week, 38% higher than in 2019. 

Transatlantic volumes meanwhile have been declining gradually since last May, and in June dipped below 2019 levels. Carriers had shifted capacity to this lane earlier in the year as transpacific demand sagged, but as volumes and rates – this week at $1,688/FEU – fall below pre-pandemic levels, carriers are beginning to shift capacity away. 

In labor news, the ILWU Canada membership ratified the revised agreement with port operators late last week, putting an end to the dispute that had shut down Canadian ports for the first half of July. US LTL carrier Yellow, which had ceased operations last week and blames Teamsters for hastening its demise, filed for bankruptcy protection this week, with competitor XPO announcing a planned increase in capacity as Yellow has exited the market. In air cargo, some observers think the demand lull has reached its floor and should start a gradual recovery. For now Freightos Air Index data shows Asia – Europe air rates have been stable, at about the $3/kg level since about May with weekly rates ticking up 2% to $3.14/kg last week, about 40% lower than a year ago. Transpacific rates fell 12% this week to $3.48/kg, more than 50% below last year and transatlantic prices fell 6% to $1.69/kg and 44% lower than last August.

Weekly highlights

Ocean rates – Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) increased 12% to $1,527/FEU.
• Asia-US East Coast prices (FBX03 Weekly) climbed 3% to $2,598/FEU.
• Asia-N. Europe prices (FBX11 Weekly) dipped 2% to $1,264/FEU.
• Asia-Mediterranean prices (FBX13 Weekly) increased 2% to $1,992/FEU.

Air rates – Freightos Air index

• China – N. America weekly prices decreased 8% to $3.94/kg
• China – N. Europe weekly prices fell 1% to $3.09/kg.
• N. Europe – N. America weekly prices fell 1% to $1.79/kg.

Analysis

Yellow’s last attempts to stay afloat in the face of mounting debt and an ongoing labor dispute fell short last week, as the LTL carrier ceased operations and will reportedly file for bankruptcy.  Yellow was one of the US’s largest carriers, and LTL rates are expected to climb in the near term as their capacity is removed from the market. 

The dispute causing the on again off again ILWU Canada port worker strike appears – once again – to have been resolved. Union members voted down a tentative agreement late last week raising the prospect of a renewed strike until leadership accepted a revised proposal Sunday night which will head back to members for ratification later this week.  Though operations have returned to normal since mid-month, the rail backlog built up over the shutdown could take up to two months to clear.  

More signs of US economic health in Q2, including consumer spending strength, are stoking optimism that inflation will be brought under control without pushing the economy into recession. 

This consumer resiliency contributed to estimates that US ocean volumes grew moderately in July and will climb into August, though some major forwarders do not expect gains through October to qualify as a true peak season.

And though transpacific rates have climbed 13% to the West Coast and 9% to the East Coast since mid-July, these increases are likely more a function of stricter reductions in capacity than of surging volumes, as carriers work to reduce over-supplied fleets. 

There is less economic optimism in Europe, and few signs of an imminent freight rebound. Even so, carriers will attempt a $600/FEU Asia – N. Europe rate increase to start the month, though consensus is that this push will not succeed. 

In air cargo, forwarders are likewise not expecting much of a rebound during the November – December  peak season, or a return to growth before 2024 at the earliest.  Still-active long-term freighter charters leased while demand surged are – together with passenger travel growth –  contributing to current overcapacity, pushing rates down as demand sags.

The Freightos Air Index Global benchmark closed July level with June but 29% lower than a year ago. China -N. Europe rates ticked up 2% to $3.09/kg in July and China – US prices were at $3.94/kg, for a 4% increase, but 31% and 47% lower than a year ago, respectively. Transatlantic rates fell 11% to $1.79/kg, about 40% lower than a year ago. 

Weekly highlights

Ocean rates – Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) increased 2% to $1,366/FEU.
• Asia-US East Coast prices (FBX03 Weekly) climbed 6% to $2,519/FEU.
• Asia-N. Europe prices (FBX11 Weekly) were level at $1,285/FEU
• Asia-Mediterranean prices (FBX13 Weekly) fell 2% to $1,956/FEU.

Air rates – Freightos Air index

• China – N. America prices increased 1% to $4.29/kg
• China – N. Europe prices increased 3% to $3.12/kg. 

• N. Europe – N. America prices fell 1% to $1.80/kg.

Analysis

Labor disputes in logistics had an eventful week and a half.

ILWU Canada negotiators accepted a mediated proposal and ended its two-week strike on July 13th, only to have its caucus reject the agreement and restart a strike before reconsidering and ending the strike again a week ago. Union leaders are now presenting the terms to its members with a vote on ratification expected later this week. 

Teamsters at UPS – who had authorized an August 1st strike – accepted a tentative agreement yesterday, with ratification expected over the next few weeks.  And Teamsters at LTL carrier Yellow called off a strike planned to begin yesterday as negotiations continue.  

Transpacific ocean rates trended up last week, and daily rates so far this week have climbed another $200/FEU on both lanes, pushing Asia – US West Coast rates to more than $1,500/FEU – 3% above 2019 levels – and East Coast prices to about $2,600/FEU.

These rate increases come alongside reports of full vessels and even containers getting rolled to later sailings. Taken together, these developments likely reflect the beginning of a peak season increase in demand. But, while blanked sailings usually decrease during peak season, reports of increases in capacity reductions suggest that carriers are nonetheless facing an oversupplied market and need to reduce capacity in order to realize volume increases in the form of higher spot rates. And this challenge is only getting bigger as the delivery of new vessels will push transpacific capacity up 19% higher than last year by the end of August. 

If we are seeing the start of peak season, projections still vary on how long it will last, with some expecting normal seasonality with elevated volumes through October, and others predicting an early decline by September.

The Panama Canal Authority has also announced reduced daily transits starting in August due to persistent low-water levels, which could also put some upward pressure on East Coast rates.

In Asia – N. Europe trade, carriers have faced lagging volumes and increases in capacity from new ultra large vessels, but have kept rates at about $1,300/FEU – on par with 2019 levels – since early June through blanked sailings and slow steaming, without canceling as many sailings as they did last year.  Despite these market conditions, several carriers have announced August 1st General Rate Increases that would push rates up to about $1,900/FEU. 

In air cargo, major US carriers reported this week that Q2 cargo performance was below 2019 levels as demand is in a lull alongside capacity climbing on recovering passenger travel. Freightos Air index rates were at $4.29/kg for the transpacific last week, and $1.80/kg on the transatlantic, both about 40% lower than a year ago. 

Weekly highlights

Ocean rates – Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) increased 11% to $1,319/FEU. This rate is 82% lower than the same time last year.
• Asia-US East Coast prices (FBX03 Weekly) climbed 8% to $2,376/FEU, and are 76% lower than rates for this week last year.
• Asia-N. Europe prices (FBX11 Weekly) were unchanged at $1,300/FEU, and are 88% lower than rates for this week last year.
• Asia-Mediterranean prices (FBX13 Weekly) fell 2% to $2,149/FEU, and are 83% lower than rates for this week last year.

Analysis

After four days without meetings, ILWU Canada talks with the BCMEA resumed Saturday as the port worker strike entered its second week. Federal mediators are now also involved in negotiations.

Container ship backlogs have now developed, with more than 10 vessels anchored near Vancouver and several off Prince Rupert port. And though ILWU and ILA members in the US have pledged not to handle diverted containers to the West or East Coast, respectively, there are already reports of diversions and rotation changes – some already handled – to US West Coast ports.

This diversion of volumes may have been one factor in transpacific ocean rate increases last week, as prices to the West Coast climbed 11% to $1,319/FEU and 8% to the East Coast.

These rate climbs could also reflect some uptick in demand and the hoped-for start of peak season. 

In addition to anticipating minimal impact from the strike in Canada for US shippers, and expressing concern over the looming UPS Teamsters strike, the latest National Retail Federation report on US ocean import volumes estimates June volumes declined from May but were about on par with 2019 levels, and projects a 4% monthly increase in July, a 5% climb in August and still-elevated volumes through October – with monthly throughput up to 5% higher than in 2019. 

Though not everyone is convinced, these projections predict a return to pretty typical seasonality and growth relative to pre-pandemic. Combined with still-elevated inventories for many retailers, these estimates also imply expectations for resilient consumer spending through the holiday season. 

With volumes higher than in 2018 and 2019 in May and June, ocean rates that for the most part have been at or below 2019 levels may be more a function of excess capacity than of subdued demand. 

And if volumes do continue to increase, carriers may still have a difficult time pushing freight rates up as new vessels are slated to enter the transpacific in August and September, adding 20-25% more capacity than last year. Carriers are already trying to mitigate the supply-side increase through more blanked sailings, slower sailing speeds, and additional port calls.

In Asia – N. Europe trade more carriers announced significant planned rate increases for the end of the month. But with current rates of $1,300/FEU just below 2019 levels, only moderate signs of demand increases, and more new capacity entering this market as well, many are skeptical that this GRI will succeed. 

IATA’s latest air cargo demand data show that global volumes fell by more than 5% in May compared to last year and were 7% lower than in 2019.  Freightos Air Index benchmarks for air cargo rates had China – N. Europe prices at $3.12/kg last week, and China – N. America rates at $3.94/kg, both up slightly from a week before, with transatlantic prices of $1.81/kg 5% lower compared to a week prior.

Weekly highlights

Ocean rates – Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) dipped 1% to $1,192/FEU. This rate is 84% lower than the same time last year.
• Asia-US East Coast prices (FBX03 Weekly) decreased 4% to $2,203/FEU, and are 78% lower than rates for this week last year.
• Asia-N. Europe prices (FBX11 Weekly) increased 2% to $1,297/FEU, and are 88% lower than rates for this week last year.

Analysis

Members of Canada’s ILWU port worker union have been on strike since July 1st, shutting down operations at the ports of Vancouver and Prince Rupert and putting pressure on port operators to come to an agreement on terms for a new contract. 

Negotiations that continued during the first days of the strike have now stalled. Though there are some reports of building backlogs, other measures show little signs of congestion just yet as carriers may be diverting cargo to alternate ports. 

Freightos Terminal data for Shanghai – Vancouver show container rates have gone unchanged since the strike started. A prolonged shutdown and significant enough diversions could push rates up at alternate ports.  And while the US’s ILA port worker union has pledged not to handle diverted cargo, business groups in Canada are urging the government to issue a back to work order. 

In the meantime, transpacific rates decreased slightly last week and – as back in early July 2019 prices had already started to climb on a peak season increase in demand – rates are now more than 20% below 2019 levels to both coasts.

Asia – N. Europe prices ticked up 2% last week to about $1,300/FEU, just below 2019 levels. Maersk announced a significant rate hike up to $1,900/FEU planned for the end of July on this lane. 

But with minimal volume growth on the ex-Asia lanes so far, and not a lot of optimism for a big peak season surge in demand just yet, rate increases will likely only succeed if carriers manage capacity much more strictly than they did for June’s unsuccessful transpacific GRI attempt. This task is all the more challenging given the new larger vessels now entering the market and carriers stuck with long-term chartered capacity leased during the pandemic.  

Asia – Mediterranean rates were steady at $2,188/FEU last week. Prices on this lane have decreased 11% since the end of May, but this decrease is likely a function of carriers adding capacity to the region as rates to Mediterranean ports have remained quite elevated even as prices on other lanes plummeted. Even with the recent decrease in rates, prices are still 24% higher than in 2019 as demand has proved resilient.

Weekly highlights

Ocean rates – Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) fell 15% to $1,209/FEU. This rate is 87% lower than the same time last year.
• Asia-US East Coast prices (FBX03 Weekly) decreased 8% to $2,298/FEU, and are 80% lower than rates for this week last year.
• Asia-N. Europe prices (FBX11 Weekly) fell 4% to $1,266/FEU, and are 88% lower than rates for this week last year.

Analysis

New projections this week reinforce pessimism for much of a peak season rebound in N. America and Europe this year. And in terms of freight rates, any increase in Asia – N. Europe demand could have difficulty pushing prices up as several new ultra large vessels enter the market and replace smaller ships in July and August, likely putting downward pressure on rates.

Without any significant volume increases yet this month, rates have fallen from early-June GRI attempts.  Prices from Asia to the US West Coast fell 15% last week to about $1,200/FEU, a level lower than at the end of May. 

Rates to the East Coast fell 8% last week to about $2,300/FEU, about on par with rates for much of May and just below 2019 levels. The Panama Canal Authority announced that, due to weather conditions that have recently improved the canal’s watershed, it has canceled additional draft restrictions meant to go into effect shortly which could have further limited the canal’s capacity, and possibly pushed rates up. 

Rates for US exports have also fallen recently both on easing volumes and on competition among carriers to increase export bookings as import rates that typically subsidize backhaul costs lag. FBX US West Coast – Asia rates have fallen more than 20% since March to $589/FEU, still 6% higher than in 2019.

Asia – N. Europe prices fell 4% last week to about $1,260/FEU, and remain below levels in May and on par with 2019 rates. Meanwhile, low water levels in the Rhine are resulting in surcharges for containers moving inland by barge. 

In air cargo, some voices are still optimistic for a peak season recovery, while other signs point in the opposite direction as FedEx will make further reductions to its air fleet and to its LTL trucking network as well.

Clarification: Last week’s update stated that Freightos Air Index rates for China – N. Europe prices dipped 3% over the last month to $3.18/kg and are 53% lower than last year. China – N. America rates climbed more than 20% this month to $5.60/kg but are 25% lower than a year ago, while transatlantic prices dipped 10% to $2.23/kg and are 39% lower than last June.  

Thanks to the sharp-eyed readers who flagged the sharp jump. That update had relied on a specific weight break (100-300kg) while we typically use an overall average rate across all weight classes which was far less dramatic, with China – N. Europe rates down 1% since a month ago to $2.98/kg and 14% lower than last year, China – US prices up 8% to $4.15/kg, down 8% annually, and transatlantic rates down 11% to $2.04/kg and 41% lower than last year.

Weekly highlights

Ocean rates – Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) fell 9% to $1,427/FEU. This rate is 85% lower than the same time last year.
• Asia-US East Coast prices (FBX03 Weekly) decreased 5% to $2,487/FEU, and are 79% lower than rates for this week last year.
• Asia-N. Europe prices (FBX11 Weekly) increased 10% to $1,325/FEU, and are 88% lower than rates for this week last year.

Analysis

Labor disruptions that had slowed operations at major US West Coast ports since the beginning of the month ended last week as the ILWU and PMA agreed to terms for a new six-year contract, with little lingering impact on container flows. 

The tentative agreement that will head through a ratification process over the next couple months reportedly includes a $70 million bonus and a gradual 32% wage increase for union members through 2028.  Though other labor negotiations are ongoing – including ILWU Canada members and UPS Teamsters each authorizing their leaderships to call strikes if necessary – the resolution of this 13-month dispute represents a significant shift in the transpacific ocean landscape.

The threat of West Coast labor disruptions was one major driver of the volume shift from West Coast ports to the East Coast and Gulf – with West Coast ports now handling 56% of Asian import volumes down from more than 60% for much of the pandemic – and its removal could lead to some recovery of that traffic. 

But improvements in East Coast and Gulf port capabilities as well as some diversification of sourcing to places like India and Vietnam whose containers typically head to the East Coast via the Suez Canal could also mean that not all shippers will be coming back. 

In the near-term, the West Coast might enjoy an increase in volumes at the expense of alternative destinations as drought-driven low water levels in the Panama Canal are getting worse, with added restrictions announced for July that could significantly reduce the number of daily transits possible via the canal.

In terms of consumer demand, the Federal Reserve’s decision not to increase interest rates last week – after 10 consecutive increases – and improvements in consumer sentiment on easing though still elevated rates of inflation could be positive indications for consumer resiliency. 

But those positive signs aren’t translating into a freight volume or rate rebound just yet, with only moderate increases in US import ocean volumes so far as we enter the typical peak season months and a lot of uncertainty surrounding when inventories will run down and consumer resiliency. 

Carrier hopes for a June peak season bump were mostly dashed as transpacific rates have retreated from their early June GRI-driven increases. Prices to the West Coast fell 9% last week, with the latest daily rate dropping another 15% to about $1,200/FEU, a level even lower than at the end of May. 

Rates to the East Coast fell 5% last week and slid another 6% so far this week to $2,342/FEU, about on par with rates for much of May and just below 2019 levels. Panama Canal low water surcharges are likely helping keep East Coast rates from decreasing further, and could put upward pressure on prices if conditions worsen. 

Asia -N. Europe prices climbed last week, likely from an early-month rate push by carriers, but prices so far this week also appear to be falling to about the $1,260/FEU mark, below May levels and 5% below rates in 2019.

Though some in the air cargo space are still hopeful for some demand rebound air cargo peak season late in the year, others are less optimistic. As the drop in freighter conversions reflects, demand for air cargo continues to drop just as passenger travel and the cargo capacity it adds to the market continues to recover.  

Freightos Air Index rate data show that China – N. Europe prices dipped 3% over the last month to $3.18/kg and are 53% lower than last year. China – N. America rates climbed more than 20% this month to $5.60/kg but are 25% lower than a year ago, while transatlantic prices dipped 10% to $2.23/kg and are 39% lower than last June.