Is the recent dip in Asia-US container rates a fleeting respite, or are we on the brink of a shipping surge?
In the ever-turbulent seas of global trade, container rates between Asia and the United States have recently experienced a slight decline. However, this calm may be deceptive, as shippers are hastily advancing their shipments to capitalise on a 30-day tariff suspension. This manoeuvre could potentially exert upward pressure on rates in the near future. Let’s delve into the factors influencing these rate fluctuations and what they signify for the shipping industry.
Current Rate Trends
According to supply chain advisors Drewry, global average container rates have decreased by 3% this week. Since 1 September, these rates have plummeted by nearly 18% and are down by almost 45% from their peak in mid-July. Specifically, rates from Shanghai to both US coasts have seen a 1% reduction.
Despite this downward trend, Drewry anticipates a slight decrease in spot rates in the coming week, attributing this to an increase in capacity as container ship order books reach record highs.
The Impact of Tariff Suspensions
Judah Levine, head of research at online freight shipping marketplace Freightos, notes that his company is already observing some upward pressure on prices. This is partly due to shippers expediting their shipments to beat the 30-day pause before tariffs are enacted. Levine explains, “We could expect frontloading ahead of tariffs – which has been a major factor keeping US ocean import volumes and transpacific container rates elevated since November – to intensify until the new tariffs are introduced or called off.”
Determining the exact impact of these advanced shipments is challenging, especially with the market lull surrounding the Lunar New Year holiday. However, Levine suggests that demand and rates could increase post-Lunar New Year.
Relevance to the Chemical Industry
While most chemicals are transported in liquid form via tankers, container ships play a crucial role in transporting polymers, such as polyethylene (PE) and polypropylene (PP), which are shipped as pellets. Additionally, liquid chemicals are often transported in isotanks via container ships. Therefore, fluctuations in container shipping rates directly affect the chemical industry.
Stability in Liquid Tanker Rates
In contrast to the container shipping sector, US chemical tanker freight rates have remained steady this week, with contract of affreightment (COA) nominations holding firm across most trade lanes. For instance, in the South American trade lane, COAs remain robust, leaving minimal spot availability. Similarly, the US Gulf (USG) to Amsterdam-Rotterdam-Antwerp (ARA) route has seen limited activity, with only a few reported fixtures.
Overall, rates appear to be maintaining current levels, particularly for 3,000- and 5,000-tonne parcels. The USG to Asia routes have also experienced a quiet week, with spot rates remaining steady as first-half February space across regular carriers is sold out.
Panama Canal Developments
In a related geopolitical development, Panama’s president announced that the country will not renew its agreement with China’s Belt and Road Initiative (BRI) following a visit from US Secretary of State Marco Rubio. This decision could have significant implications for global shipping routes and costs, especially if it leads to changes in control or access to the Panama Canal.
“We could expect frontloading ahead of tariffs – which has been a major factor keeping US ocean import volumes and transpacific container rates elevated since November – to intensify until the new tariffs are introduced or called off.” – Judah Levine, Head of Research at Freightos
The recent dip in Asia-US container rates may offer temporary relief, but the underlying factors suggest potential volatility ahead. Shippers are strategically advancing their shipments to take advantage of the tariff pause, which could lead to increased demand and higher rates in the near future. Additionally, geopolitical developments, such as Panama’s decision regarding the BRI, could further influence global shipping dynamics. Stakeholders in the shipping and related industries should stay vigilant and adaptable to navigate these shifting tides.
