Transpacific Is the Most Unpredictable Trade at Present

first_imgzoomIllustration. Image Courtesy: Pixabay under CC0 Creative Commons license Service withdrawals and new tariffs sent Asia to West Coast North America container spot freight rates into hyper-drive from the end of July, but there could be a sting in the tail, according to the latest report by shipping consultancy Drewry.The Transpacific trade, the world’s largest deep-sea market, is currently the most unpredictable container trade which is once again a money printing factory for carriers. By the end of July, following earlier service suspensions ships were full, cargo was being rolled and carriers’ coffers were quickly filling up again.Drewry explained that the sudden cargo rush was attributed to US President Donald Trump’s imposition of new tariffs on a whole range of Chinese goods, which came into effect on September 24 and spurred American importers to bring forward supplies.“Unlike earlier rounds of trade tariffs from Washington, the list this time has a more visible impact on the US-China container trade as it includes more containerised consumer goods. Nonetheless, the rush to beat the September 24 deadline appears to have been slower than earlier anecdotal reports initially suggested.”Container shipments from Asia to the US increased in 3Q18 by 5% year-on-year to all coasts, but nothing like at the rate seen in 1Q18 ahead of the first tariff lists when annual growth was about 13%. For Asia to US West Coast specifically, volumes increased at a much slower rate than seen on both the East and Gulf coasts, rising by 2.5% year-on-year in 3Q18.“Reasons for the smaller than expected peak season spike could be that importers were already in possession of more stock following the earlier cargo stampede, and/or were less fearful of the impact the new tariffs would have due to a devaluation of the Chinese currency that almost matched the 10% hike in duties.”With US tariffs slated to be increased to 25% on January 1, 2019 “there is clearly scope for yet another artificially stimulated shipping season in November and early December.” However, Drewry said that there won’t be much left in the system for the early months of next year when carriers will depend on having a strong market to support negotiations for annual contracts, generally to be signed for May 1.“The extraordinary situation that the tariffs have created means that it is very difficult to pin down the underlying demand that exists in the Transpacific. Our rolling 12-month average suggests that it is fairly weak even with the stimulus provided by President Trump’s foreign policy.”“It would seem that carriers are banking on a prolonged cargo boom in the Transpacific,” Drewry said, adding that Maersk Line is reportedly about to phase two ships of 17,800 TEU into the 2M TP6/Pearl service serving Los Angeles exclusively that presently deploys 6 x 13,000 TEU units.“How long those ships, and indeed other smaller units, remain in the trade is an open question and will largely be decided by geo-politics over the coming months.”last_img

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