Sea freight market strengthens independent of peak season

While much has been made of the impact of the peak season from Asia on sea freight rates, the fact is this is just one element driving the market and arguably the line’s capacity management is a bigger driver, with rising rates to the US and another attempt by the lines to recover revenue from Asia to Europe and the Med.

Average spot rates from Asia to the US West Coast have jumped up to 70% in the last two months, despite the apparent lack of any meaningful peak season. It does look like effective capacity management by the container shipping lines, has coincided with modest volume increases due to inventory restocking, which has altered the spot market, sending rates up from post-pandemic lows.

The disconnect between the absence of a peak season and freight rate fluctuations moving into 2024 is unusual, with the the altered dynamic apparent on the trans-Pacific trade since the spring.

Dynamics apparent on the trans-Pacific, often have a habit of appearing on Asia to Europe routes within weeks, particularly when the lines’ strategy restores revenues.

Carriers have already successfully implemented trans-Pacific general rate increases (GRIs) in April, June, July and August, with a Asia-Europe GRI implemented in August, solely on the basis of current market conditions, which are tight, as evidenced by recent reports of cargo rolling in Asia.

Vessel utilisation has increased significantly over the past several weeks, aided by Panama Canal restrictions, diverted booking volumes from Canada’s West Coast gateways and more blank sailings in July, and it will be some time before the ILWU Canada labour agreement has any impact on the situation.

After a massive splurge in vessel ordering over the past two years, the new container ship order book is larger than at any other time and with record number of new ships joining the global fleet, the ocean carriers are getting more aggressive in withdrawing capacity.

Although the 2023 peak season may be muted in the US and Europe, trade dynamics may gradually improve for the remainder of the year and the lines would dearly love to increase rates, though with sentiment still muted, this quarter will be critical.

The main sea freight trade-lanes are multi-layered and complex, which means actions by carriers and alliances can have a profound impact on services and the market’s competitive dynamics, which is why our sea freight team work closely with our carrier partners and offices across China and Asia, to identify opportunities for our customers.

If you have any questions about the developments outlined in this article, please reach out to Stefan Holmqvist or EMAIL [email protected] for the latest insights and intelligence.