Key insights:
1. US ocean imports fell in December and are projected to be well below 2021-2022 levels into H1. But these projections remain above 2019 levels, suggesting demand is normalizing.
2. Ex-Asia ocean rates were unchanged this week, suggesting rates are normalizing too. Without the typical pre-Lunar New Year increase in demand this year though, Asia-US West Coast rates are more than 10% lower than in early 2020.
3. Despite falling volumes and a significant decline in price, Asia - N. Europe rates remain more than 25% higher than in early 2020, possibly an indication that blanked sailings by carriers have slowed the rate slide on this lane.
Ocean rates:
• Asia-US West Coast prices (FBX01 Weekly) increased 1% to $1,396/FEU. This rate is 90% lower than the same time last year.
• Asia-US East Coast prices (FBX03 Weekly) dipped 1% to $2,858/FEU, and are 84% lower than rates for this week last year.
• Asia-N. Europe prices (FBX11 Weekly) fell 1% to $2,712/FEU, and are 81% lower than rates for this week last year.
Analysis
The latest National Retail Federation data on US ocean imports estimate that December volumes were 10% lower than a year earlier, and that imports through May will likewise consistently be below 2022 and 2021 levels.
But monthly volumes since June, when imports began decreasing, and projections through May all remain above 2019 levels, suggesting that – for now – ocean demand is in a process of normalization from the sustained surge of the last couple years, as opposed to a recession-driven collapse. The NRF projects that growth will return in the second half of the year.
Normalizing volumes – and easing congestion along with the drop in traffic – are likewise leading to stabilizing and normalizing ocean rates, as ex-Asia container prices went largely unchanged last week.
The build up of inventories and some slowdown in US consumer demand in the second half of last year has meant the absence of the typical mini-surge in volumes and spot rates just ahead of Lunar New Year, which starts on the 21st. This difference may likewise account for Asia - US West Coast rates being 11% lower than in January 2020 when – despite the first signs of the pandemic – prices climbed ahead of the holiday.
Despite falling volumes and a significant decline in price, Asia - N. Europe rates remain more than 25% higher than in early 2020, possibly an indication that blanked sailings by carriers have slowed the rate slide on this lane.
Early in the week a bulk vessel grounded in the Suez Canal temporarily disrupting traffic and bringing to mind the major blockage of the canal in 2021. The ship was refloated only a couple hours later, but – given that carriers now have excess capacity available to address disruptions, compared to virtually no free ships at the time the Ever Given got stuck – even if the delay was longer the impact would likely not have been as pronounced as last time.
Likewise, the system outage that led to the temporary grounding of US departing flights this week will likely lead to some air cargo delays and pressure on the market. But as demand has eased in air cargo too, the recovery should be easier than under the peak volumes experienced a year ago.
