SHIPPING: Global container rates edge higher, volumes shifting to West Coast ahead of tariffs

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Adam Yanelli

19-Jul-2024

HOUSTON (ICIS)–Global shipping container rates
edged slightly higher this week as they
continue to moderate after more than doubling
from early-May, and rates from Shanghai to the
US West Coast fell, according to supply chain
advisors Drewry.

Drewry’s composite World Container Index (WCI)
rose by just 1% and is up by just 1.2% over the
past two week, as shown in the following chart.

Average rates from China to the US East Coast
have continued to rise and are nearing
$10,000/FEU (40-foot equivalent unit), as shown
in the following chart.

Drewry expects ex-China rates to hold steady
next week and remain high throughout the peak
season.

Rates from online freight shipping marketplace
and platform provider Freightos showed similar
rates of increase.

Judah Levine, head of research at Freightos, in
noting the slower rate of increase also pointed
to signs that prices may have already peaked.

“Daily rates so far this week are ticking lower
and major carriers have not announced surcharge
increases for later this month or August,”
Levine said.

Levine said peak season likely started early
this year as retailers ordered early to beat
possible labor issues at US Gulf and East Coast
ports and as consumers continued to spend on
goods.

Emily Stausboll, senior shipping analyst at
ocean and freight rate analytics firm Xeneta,
said she is seeing some carriers already
lowering spot rates.

“This suggests a growing level of available
capacity in the market and shippers can once
again start to play carriers off against each
other – instead of feeling they need to pay
whatever price they are offered to secure
space. As the balance of negotiating power
starts to swing back towards shippers, we
should see spot rates start to come back down,”
Stausboll said.

Container ships and costs for shipping
containers are relevant to the chemical
industry because while most chemicals are
liquids and are shipped in tankers, container
ships transport polymers, such as polyethylene
(PE) and polypropylene (PP), are shipped in
pellets.

They also transport liquid chemicals in
isotanks.

VOLUMES SHIFT TO WEST
COAST

The Port of Los Angeles saw a 10% increase from
the previous month and a slight increase year
on year in volumes, Gene Seroka, executive
director of the Port of Los Angeles said.

Some retailers are rushing to import volumes
ahead of the US presidential election in
November as Republican nominee Donald Trump has
proposed hiking tariffs, especially on goods
from China.

But a persistently strong economy is also
supporting the rise in imports.

“The US economy continues to be the primary
driver of our cargo volume and I expect to see
that continue in the months ahead,” Seroka
said.

Many importers shifted their deliveries to the
US East Coast in 2022 when congestion at West
Coast ports surged amid strong consumer demand
coming out of the pandemic.

The shift in volumes from the East Coast has
not led to any congestions at the West Coast
ports of Los Angeles and Long Beach, according
to the Marine Exchange of Southern California
(MESC).

“Vessels and cargo arriving, departing, and
shifting around the ports of LA and LB and
continue to move normally with no labor delays
and ample labor,” MESC executive director Kip
Louttit said.

Louttit also said the forecast for arriving
container ships over the next two weeks is
trending higher.

LIQUID CHEM TANKER RATES
Rates for liquid chemical tankers ex-US Gulf
were stable to softer this week, with decreases
seen on the USG-Asia and USG-Brazil trade
lanes.

From the USG to Asia, there has still been
interest in large cargoes, but volumes overall
have been slowing down.

The absence of market participants has caused
freight rates to stumble some, with more
downward pressure on smaller parcels due to the
small pockets of space readily available.

From the USG to Brazil, the list of ships open
in the USG continues to grow, with space still
available which could lead to continued
downward pressure and even lower rates.

Activity typically picks up during summer
months, but this is not currently being seen.

PANAMA CANAL
The Panama Canal will limit transits from
3-4 August because of planned maintenance.

The east lane of the Miraflores locks will be
out of service for concrete maintenance on the
east approach wall, the Panama Canal Authority
(PCA) said.

The PCA began limiting transits in July 2023
because of low water levels in Gatun Lake
caused by an extended drought.

Restrictions have gradually eased over the past
few months and are approaching the average
daily transits of 36-38/day seen prior to
impacts from the drought.

The improved conditions at the canal are likely
to improve transit times for vessels traveling
between the US Gulf and Asia, as well as
between Europe and west coast Latin America
countries.

This should benefit chemical markets that move
product between regions.

Wait times for non-booked southbound vessels
ready for transit have been relatively steady
at less than two days, according to the
PCA vessel tracker.

Wait times were less than a day for northbound
vessels and less than two days for southbound
traffic.

Focus article by Adam Yanelli

With additional reporting by Kevin
Callahan

Visit the ICIS Logistics – impact on
chemicals and energy topic
page
.

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