Eytan Buchman, CMO at online freight marketplace and SaaS software provider Freightos, has published his latest analysis on sea and air rates.
Here are the latest China-US container rates, which are heavily impacted by the ongoing outbreak:
- China-US West Coast prices (FBX01 Daily) increased just 1% since last week to $1503/FEU. Rates are 2% lower than the rates in 2019 at this time.
- China-US East Coast prices (FBX03 Daily) are likewise up 1% from last week, reaching $2658/FEU. This rate is the same as it was for this week last year.
Key insights below:
- Ocean rates stayed steady this week due to blank sailings, but while transpacific ocean rates are just 2% higher than in mid-February, air cargo rates continue to soar, up more than 400% in the last two months according to Freightos.com marketplace data.
- Freightos.com marketplace data show shippers are increasingly turning to LCL as a solution to manage inventories during uncertain demand, with an 55% increase in LCL shipments week over week in mid-April.
Analysis
Though debate in the US and much of Europe is now centered around when and how to restart the economies, the global drop in demand for most non-essential goods is still rippling through logistics.
Impacts on ocean
The record blank sailings announced in the last few weeks succeeded in propping up ocean rates in this low-demand environment this week. But carriers are concerned that the Labor Day holiday in China that shuts down manufacturing from May 1st to 5th could mean even fewer available shipments and a drop in rates.
Ocean carriers are benefiting from lower fuel costs thanks to falling oil prices, but no carrier, with the exception of CMA CGM, has cancelled or reduced its fuel surcharge, angering some shippers.
But there was some good news in ocean freight this week: the solutions to store the surge of unwanted containers – ordered before COVID-19 spread in the West and arriving in the US and Europe from China now – have managed to prevent the feared congestion that is disrupting supply chains in India.
This success will allow imports to keep moving, though US ports are expecting very low volumes through June with subdued summer and back to school imports.
Impacts on air
Air rates stayed elevated this week thanks to limited capacity and still-peaking demand for PPE and medical supplies. Demand is so great that China’s PPE manufacturers will reportedly stay open over the Labor Day holiday.
This demand as well as new Chinese customs requirements aimed at weeding out shoddy PPE products are pushing rates out of China to record highs. WebCargo dynamic air cargo rate data indicate that prices out of Europe stayed elevated but level this week.
The price of air cargo is so inflated that the Australian government is subsidiszing air exports, and the USPS has taken the rare move of shipping mail to Europe by ocean. Some observers anticipate high air rates even after the shutdown ends as many passenger flights and their cargo capacity will likely stay cancelled even as other restrictions are lifted.
Looking for alternatives
In addition to the expedited ocean services launched earlier this month, the demand slump and high air rates seem to be combining to push up the use of Less than Container Load (LCL) ocean shipping during the crisis. LCL is a cost-effective way for shippers to import more modest inventories with demand being uncertain.
Freightos.com marketplace data for LCL shipments booked since the outbreak show orders increasing by 25% in April compared to March. In mid-April, LCL orders jumped by more than 55% week over week as importers look for solutions during the shutdown.
