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Trans-Pac recovery could be more than a year away
According to analysts, the eastbound trans-Pacific will face a hard landing marked by declining freight volumes and spot rates in the next few months. The earliest possible recovery will be peak season 2023.
US imports from Asia decreased 6.5% YoY in September and 11% in October, according to PIERS. Monthly cargo volumes have fallen below pre-pandemic 2018 and 2019 levels.
As of November 28th, carriers had scheduled blank sailings equal to 17.5% of total trans-Pacific capacity for December and 6.2% in January. This is a significant decrease from 25.3% in December 2021 and 30.8% in January 2022. However, carriers will likely skip more sailings over the next two months than they have announced publicly.
Spot rates have dropped from a record high of $14,000 per FEU to $2,000 per FEU. However, analysts believe this does not signify a rate war is underway. Rather, it seems rates are normalizing.
The average spot rate from Shanghai to LA this week was $2,039 per FEU. That is down 1% from last week and 79% YoY. The Shanghai to NY spot rate was $4,408 per FEU, down 9% from last week and 65% YoY.
By October, carrier on-time performance improved to 35.7% to the West Coast and 26.9% to the East Coast. As a result, only 6.7% of effective capacity remains unavailable. The re-release of capacity is taking place at the same time that cargo volumes are declining. Therefore, this hard landing will continue well into 2023.
There are two possible scenarios for a recovery. In the optimistic scenario, the US will experience a short, shallow recession that ends by next summer. In the pessimistic scenario, the recession is deeper and longer. Therefore, strong import growth will not return until after the Lunar New Year in 2024.
MSC drops JNPT call on India-US connection
The ongoing downturn in cargo volumes is prompting ocean carriers to curtail Indian ports of call on major trade routes. They are aiming to tighten vessel operating costs. MSC recently removed a stop at JNPT from its INDUS 2 string, leaving Indian exporters/importers with a single direct call at Mundra Port.
MSC added the eight-vessel, weekly INDUS 2 to its network in August 2021 to capitalize on stronger-than-expected exports out of India. This came amid an acceleration in global sourcing from Asia after demand rebounded swiftly from the pandemic shock.
MSC has a terminal partnership with the Adani Group at Mundra. Therefore, the carrier receives predictable operational and commercial advantages with an option to aggregate cargo on top of its already growing transshipment loads there.
According to industry sources, all major liners are facing challenges finding enough cargo to fill export space allocations for India. Therefore, freight rates are already at near pre-pandemic levels.
According to government data, India’s global merchandise exports by value fell 17% year over year in October.
About O’Neill Logistics
O’Neill Logistics is a leading third party logistics provider. We operate in California, Savannah, New Jersey. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.
O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.
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