Page 6 - Al-Rashed Newsletter June 2022

SHIPPING WORLD

Early peak season, mixed signals to test Asia-US rate strength

The coming two months will reveal just how much US importers are pulling
back on orders from Asia, and the degree to which container lines can adjust
capacity as easing vessel space on some trades pulls down spot rates.

Forwarders tell JOC.com they expect a bump in spot rates in the coming
weeks when an anticipated early peak season ripples into the trade
beginning in late June. But the scale of the rate increase and length of the
peak season are unclear, as some shippers are pulling back or even
canceling orders, while others are front-loading cargo.

However, the number of orders for Asian imports to the US and Canada has
been steadily rising since February and into May, as tracked by Infor Nexus.
The number of orders to China in May jumped to nearly 150,000, the highest
monthly volume of new orders since November 2021, according to Infor
Nexus, a global network platform for direct procurement, origin order
management, multimodal freight management, and trade finance services.

The spot rate from Shanghai to Los Angeles last week was $8,704 per FEU,
basically unchanged from the previous two weeks but 46 percent higher than
June 2021, according to the Drewry World Container Index. The spot rate
from Shanghai to New York last week was $10,871/FEU, also flat with the
previous two weeks but up 44 percent from a year ago.

Premium rates, which carriers imposed last year when demand exceeded
vessel supply in the eastbound trans-Pacific and are intended guarantee that
containers get loaded onto ships as booked, have faded. That’s a sign there
is excess capacity in the trade for the first time in approximately two years.
“Premium rates are losing a lot of value and are coming closer to FAK [freight
all kinds] rate levels. We are seeing slippage in FAK rates, which are
fundamentally spot rates, so supply and demand is an issue, and not in the
carriers’ favor,” said James Caradonna, general manager pricing/Americas at
M&R Forwarding. “Carriers are telling us they’re not seeing an order increase
in June.”

Caradonna said that premium rates to the East Coast have come down 20
percent over the past two months from their five-digit highs, even though
import volumes have remained relatively strong. Similarly, premiums from
base ports in Asia to Los Angeles-Long Beach have come down 15 percent.

Trade-Lanes: Early peak season, reduced orders to test Asia-US rate strength (joc.com)