Container Rates Plummet on China-U.S. Routes

 

International container rates have plummeted over the past few weeks, pulled down by cooling economic signals in the West and the onset of the Golden Week holiday in China.

The core Shanghai-U.S. West Coast route saw rates drop by 31 percent week-on-week, down to just $1,600 per FEU. The all-water route from Shanghai to the East Coast fell to $2,500 per FEU, down 23 percent week-on-week. Rates from Shanghai to Europe dropped by nine percent to $1,000 per TEU, a favorable price per ton-mile for the shipper. Falling demand and falling rates are typically a sign of blanked sailings ahead. 

"If demand drops, so should capacity if you are to at least underpin the rates and prevent them from dropping. And if we look on the capacity side, the carriers are still busy blanking sailings," said Vespucci Maritime analyst Lars Jensen in a podcast released Monday. "We are now at a point where roughly 14% have been pulled out of the Pacific, 17% out of Asia and Europe."

Part of the drop on U.S. routes may be a response to tariffs on China, which currently sit at 30 percent-plus and will automatically ratchet up further on November 10 (unless Beijing and Washington negotiate another agreement). Part may also be consumer sentiment: most Americans expect the unemployment rate to rise within a year, and about one-fifth think it's possible to lose a job within five years, according to the latest data from University of Michigan's benchmark survey. 

"This month’s easing in economic views was particularly strong among lower and middle income consumers," University of Michigan consumer survey director Joanne Hsu said in a mid-September update. "Trade policy remains highly salient to consumers, with about 60% of consumers providing unprompted comments about tariffs during interviews, little changed from last month."