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Carriers trim blank sailings in May as rates steady
Ocean carriers made fewer cuts to trans-Pacific vessel services in May after implementing a series of ad hoc cuts in April. As a result, rates appear to have found a floor. There should be no significant upside until demand becomes stronger.
Liners blanked 32 weekly trans-Pacific sailings in May, accounting for 285,655 TEUs. In contrast, 46 sailings were canceled in April, accounting for 416,350 TEUs.
Ocean carriers implemented GRIs for trans-Pacific services that took effect in April. Therefore, shippers booked more space in April, pushing Asian imports to their highest level since October 2022.
Instead of random service cuts seen in April, carriers appear to have entered a more regular pattern of canceling every other sailing from a weekly service. This pattern affords shippers more regular service than ad hoc cuts.
Carriers have been able to stop further erosion in spot rates through the current capacity deployments, helping them at least come close to break-even levels. Since the GRIs took effect, spot rates have remained stagnant.
Liners tried pushing through new GRIs in May and June. However, those GRIs appear to me meaningless due to the fact that demand is not showing any signs of sustained growth.
Carriers will be able to keep withholding ships from the market due to large cash reserves. However, the new vessels arriving through 2024 will push supply to outpace demand. Therefore, carriers will need to blank roughly half of their trans-Pacific capacity to keep rates from falling.
US truckload market ‘bouncing’ along pricing bottom
It appears that a bottom is emerging in the US truckload spot market. Spot dry van, refrigerated, and flatbed rates were all rising week-to-week in late May. However, that doesn’t mean the spot market has reached an inflection point.
Those hoping for more stability in the domestic freight market may be encouraged by trends on the ocean. Ocean and trucking rates will only rise from their floors when demand becomes stronger.
Jason Miller, associate professor of logistics at MSU, said, “Data suggests that there is further room for trucking rates to fall in the coming months given demand is likely to remain soft for the next several months.” However, he also said that there is evidence we are approaching a floor in terms of freight volumes.
The long decline in spot rates might be coming to an end. At $2.06 per mile, the DAT national average dry van broker-paid spot rate for May was down only 1 cent from April’s average. The JOC shipper-paid broker rate dropped 3 cents in the same period, after a 13-cent drop in April.
Analysts expect that spring seasonality might lift truck pricing. One analyst stated, “In 2016 and 2019, it was precisely the third week in May when the spot market entered a recovery phase after prolonged declines and stagnation. Seasonality kicked in, and shippers needed more trucks.”
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