Eytan Buchman, CMO at online freight marketplace and SaaS software provider Freightos, has published his latest analysis on sea and air rates.
Starting with China-US:
China-US West Coast prices (FBX01 Daily) fell marginally by 3% since last week to $1676/FEU but as a whole are still steadily higher than they have been since last July. Rates are 28% higher than the rates in 2019 at this time.
China-US East Coast prices (FBX03 Daily) are down 5% from last week, reaching $2613/FEU. This rate is the same as this week last year.
Key insights below:
Brick and mortar retail losses are being accompanied by a shift to eCommerce. As an indicator of the shift, Amazon finally lifted its March restrictions on FBA sellers last week, leading to a 200% pop in international FBA shipments on Freightos.com – a new FBA Freightos.com record.
Ocean rates remained stable due to aggressive capacity management. Lost volumes, however, led to several carriers announcing significant Q1 losses.
Despite air cargo capacity being restored to last year’s levels out of China, rates are still extremely high due to PPE demand and the return of some commercial cargo.
Analysis
eCommerce
Drops in US consumer demand are hitting brick and mortar retailers hard, accelerating a shift to eCommerce.
Amazon has taken steps to keep up with this surge since the start of the outbreak, reducing the number and types of orders it accepted, suspending prime delivery, and limiting third party Fulfillment By Amazon (FBA) sellers services.
But last week, Amazon announced that prime delivery will return soon and removed the limit on the number of items FBAs can send to Amazon warehouses. As a result, the number of weekly FBA shipments booked on the Freightos.com marketplace hit a new all-time high last week, increasing nearly 200% week over week, and outpacing the previous record set in August 2019 by 8%.
Ocean
Ocean rates fell slightly this week, still stabilized by carriers’ record number of cancelled sailings through June. There were some signs that the cancellations may have gone too far in restricting capacity – carriers added a couple additional sailings from China to the US West Coast, and others are increasing China-Europe rates.
But these steps probably do not imply a rebound in global demand. Maersk expects its Q2 volumes to drop 25% year over year, and the National Retail Federation announced that imports will likely see double digit monthly losses compared to last year at least through August, with a rebound only in Q4 or the start of 2021.
And for carriers the stabilized rates haven’t been enough to make up for the lost number of containers shipped in many cases. Three major carriers reported significant Q1 losses this week, each of which also received some form of government bailout.
Air
Global air cargo capacity is down 25% thanks to the drop in passenger travel. But the addition of converted passenger jets to the air cargo market has succeeded in restoring or even exceeding last year’s capacity levels for most lanes out of China.
Despite the increased capacity, demand for PPE is keeping rates elevated and still causing disruptions in some hubs in China. There are signs that rates are levelling off though, as Freightos.com marketplace data indicate that prices for some lanes out of China fell for the first time in weeks by between 1-3%, while WebCargo data showed no significant change on Europe-US lanes.
