Key insights:

1. With the exception of still-elevated prices for Asia - Mediterranean trade, ocean rates on the major ex-Asia and transatlantic lanes are now all about on par with 2019 levels.

a. Asia - US West Coast prices dropped 15% last week and are about 25% below the level achieved through mid-April GRIs but remain well above the lows seen in March, as carriers blanked fewer sailings in May than in April but are managing capacity enough to keep prices from collapsing.

2. June GRIs are unlikely based on current demand trends, though low-water weight limits and surcharges for shipments passing through the Panama Canal starting in June could put upward pressure on rates, especially for Asia - US East Coast containers.

3. Inventory surpluses built up last year could prolong the freight recession even if the economy avoids a recession, which could be one factor for a possible subdued back-to-school season for logistics providers even if actual back-to-school spending is on par with last year.

4. A soon-to-be released Freightos survey of SMB importers using the freightos.com marketplace found that only about half of SMBs expect to increase their shipping activity during peak season this year, with about 40% still contending with excess inventory.

Ocean rates:

• Asia-US West Coast prices (FBX01 Weekly) fell 15% to $1,309/FEU. This rate is 89% lower than the same time last year.

• Asia-US East Coast prices (FBX03 Weekly) were level at $2,328/FEU, and are 84% lower than rates for this week last year.

• Asia-N. Europe prices (FBX11 Weekly) ticked up 3% to $1,420/FEU, and are 87% lower than rates for this week last year.

Analysis

Ocean rates across the major tradelanes may be reaching their new floor.

With the exception of prices for Asia - Mediterranean service, which, at more than $2,400/FEU remain 40% higher than pre-pandemic levels on resilient demand, ex-Asia and transatlantic rates are all about on par with May 2019 rates.

Asia - US West Coast prices dropped 15% last week and are about 25% below the level achieved through mid-April GRIs. But at $1,300/FEU rates remain well above the lows seen in March, as carriers blanked fewer sailings in May than in April but are managing capacity enough to keep prices from collapsing.

As congestion has dissipated with easing volumes, transit times and schedule reliability improved again in April, but carriers blanking sailings and slowing sailing speeds to help reduce effective capacity may be contributing to reliability and transit times that remain above pre-pandemic levels.

June GRIs are unlikely based on current demand trends, though low-water weight limits and surcharges for shipments passing through the Panama Canal starting in June could put upward pressure on rates, especially for Asia - US East Coast containers.

Consumer spending in the US increased in April and some measures of inflation climbed too. These factors may make additional interest rate hikes in June more likely, which could dampen consumer demand along with inflation.

The current disconnect between consumer behavior and freight volumes is likely due to a mix of a shift in spending toward services and toward different types of goods than those in demand during the pandemic, and to inventory surpluses built up in the first half of last year.

This build up could prolong the freight recession even if the economy avoids a recession, which is one factor in some expectations for a subdued back-to-school season for logistics providers even if actual back-to-school spending is on par with last year.

The above are leading to speculation that – if it arrives at all – freight peak season will be later than usual, concentrated in September and October. A soon-to-be released Freightos survey of SMB importers using the freightos.com marketplace found that only about half of SMB importers expect to increase their shipping activity during peak season this year, with about 40% still contending with excess inventory.