Ocean rates hitting pre-pandemic levels

Container rates from Asia to North American’s West Coast dropped to about US$1,000 per forty-foot unit this week.

According to Freightos’s weekly analysis, the drop in rates is continuing, and the predicted rebound is not yet on the horizon.

Falling rates through March and into April, increases in announced blanked sailings for the coming weeks, and contract negotiations still up in the air given the still-slumping spot market, may signal growing skepticism that any rebound has already begun or will kick in very soon, the company suggested.

Freightos reported that Asia-US West Coast prices fell one percent to $1,006/FEU in the last week of March. This rate is 94 percent lower than the same time last year. Asia-US East Coast prices decreased one percent to $2,097/FEU, and are 88 percent lower than rates for this week last year. Asia-N. Europe prices increased one percent to $1,344/FEU, and are 89 percent lower than rates for this week last year.

According to Freightos head of research Judah Levine, transpacific volumes and rates are down both because of a slowdown in pandemic-driven spending on goods. Many importers also pulled too many orders forward into the first half of last year to keep up with expected consumer demand and yo account for delays, and have been working down those inventories since then.

“Conventional wisdom is that once inventories run down – and if consumer demand is there – the industry will enter a restocking cycle and ocean demand and rates will climb. Some recent projections had that rebound to above 2019 volumes set to begin already in March,” Levine said.

“But falling rates through March and into April, increases in announced blanked sailings for the coming weeks, and contract negotiations still up in the air given the still-slumping spot market, may signal growing skepticism that any rebound has already begun or will kick in very soon.”

There is also a big question mark in the air as importers not dealing with excess inventories are also facing uncertainty around what consumer demand will look like for the rest of the year. This is causing some to be very cautious in placing new orders.

According to Levine, this caution and the desire for cost savings are among the drivers of the decline in air volumes and rates as some importers both order less and ship a higher than normal share of their volumes earlier than usual – but by ocean instead of air.