Although Asia-US West Coast rates have decreased 16% since early July, the pace of the decline has slowed when compared to the 50% drop over May and June, Freightos highlighted

By Will Waters

China’s recent military exercises – which are now expected to continue this week – have yet to significantly disrupt ocean freight operations, although a prolonged version certainly could, according to digital freight rates specialist Freightos.

Judah Levine, head of research at Freightos, highlighted that Taiwan’s Port of Kaohsiung is one of the top twenty largest container ports in the world by volume and the area harbours one of the busiest waterways in the world, handling significant traffic heading to Europe and the US from East Asia.

A sustained conflict could force vessels to take alternative routes, adding transit time, disrupting schedules and contributing to congestion that is already helping to keep ocean spot rates extremely elevated despite recent decreases.

Meanwhile, Freightos highlighted that transpacific ocean rates fell more than 6% to both coasts this week. And although Asia-US West Coast rates have decreased 16% since early July, the pace of the decline has slowed when compared to the 50% drop over May and June. “Despite being firmly in the typical peak season months, many in the industry are not expecting a coming increase in rates or volumes on the transpacific or for Asia-Europe trade, though rates are expected to stay well above pre-pandemic levels,” Levine noted.

National Retail Federation data for US ocean imports indicate that volumes peaked and set a monthly record in May. June volumes were 6% lower compared to May, and July’s imports are projected to be about even with June before volumes gradually decline through October, with monthly totals slightly below last year’s. But despite this expected decline, each of the coming three months would still be 12-15% higher than in 2019.

There are also indications of slowing consumer demand, though even inflation-adjusted spending likewise remains higher than in 2019, Levine noted.

“Taken together, these trends suggest that most of ocean freight peak season was pulled forward to spring this year,” Levine said. “Combined with some decrease in demand driven by inflation and changes in consumer spending, it also looks like the shift toward normalisation has started, but will be gradual as demand remains strong and congestion continues to strain capacity.”