With the arrival of a large number of pre-shipments a few months ago, freight rates from Asia to the United States have fallen faster than usual at the end of the peak shipping season this year. The trend is expected to result in imports from Asia below normal levels in November, according to freight agents interviewed by Business Daily. Retailers shipped holiday season imports ahead of August to ensure delivery ahead of the October 1 strike by dock workers in the eastern and Gulf of Mexico, while heavy shipments at U.S. ports in August also moderated the surge typically seen after a golden week. Golden Week typically occurs in mid-October as retailers ship high-value holiday merchandise across the West Coast.
Paul Bingham, head of transportation consulting at S&P Global Market Intelligence, said: “Advance carloads in 2024 may be larger than some analysts had expected, which could explain the current weakness in import demand, which could continue into the end of the year today.” Data from Platts shows that spot rates on the East Coast have fallen 49% since August 30, spot rates on the West Coast have fallen by 25%, and BP Energy Information is a sister company to the Journal of Commerce, the global arm of S&P. As of October 7, the East Coast spot price was $4,300 per FEU and the West Coast was $4,200 per FEU. This near-parity is unusual as the East Coast typically has a premium of nearly $1,000 per FEU than the West Coast.
There are reports that at least two trans-Pacific carriers have announced an increase in West Coast regular shipping rates of $600 per FEU starting Oct. 15. However, with imports expected to fall next month, it is widely doubted that GRI will hold up.
“(Shipping companies) are trying to push the market in a direction that is inconsistent with current demand,” said Benton Kauffman, senior vice president of DSV Global Transport and Logistics and head of trans-Pacific air and ocean freight. In addition, while shipping companies are trying to raise rates, many shipping companies also offer special “bullet” rates, which are lower than the advertised spot and various freight (FAK) rates.
“While operators are trying to increase freight rates, they are also cutting deals,” Jon Monroe, a consultant at the General Operators of Vessels (NVos), said in an interview with Business Magazine.
Since late spring, shipping companies have been offering prices that are hundreds of dollars lower than spot and FAK prices, especially on the West Coast, with ample ship space due to the launch or resumption of 10 services this year. Operators desperately want to prevent their FAK rates from falling further because not all nonprofits qualify for bullet rates, Monroe noted.
In addition to the November FAK rate drop, the Peak Season Surcharge (PSS) for NVO fixed rates is also expected to face pressure in the coming months. MOST CARRIERS IMPOSED CHARGES OF $2,000 PER FEU PSS ON NAC RATES FOR FREIGHT AGENTS ON MAY 1, AND THESE FEES HAVE REMAINED UNCHANGED OVERALL. Christian Sur, executive vice president of maritime contract logistics at NVO Unique Logistics International, said some carriers told freight agents they were willing to reduce PSS from November 1.
Sur said the price could drop to $1,200 to $1,500 after October 31, the NAC plus PSS combined rate is about $3,000 per FEU, but still lower than the FAK rate listed for travel to the West Coast, which is about $4,200 per FEU.” Sur signifie
“Overall, November and the first half of December will be fairly calm,” said James Caradonna, executive vice president at M&R Spedag Group, shipping agent M&R Spedag Group. With the Lunar New Year holidays starting on January 29, many factories in Asia will be closed for a week or two, so imports of spring goods are expected to start moving in mid-December.
Freight agents expect a traditional peak in bilateral imports before the Lunar New Year, unless there are signs of a rupture in the temporary contracts between ILA and employers in the eastern and Gulf of Mexico as the deadline for concluding agreements on January 15 approaches. Rachel Shames, vice president of pricing and procurement at freight agent CV International, said that if negotiations still showed no clear signs of progress by mid-December, retailers could start shipping freely supportable goods across the West Coast.
