Global News Asia–US East Coast spot rates hit 2022 low as shippers slow ordering

Spot container shipping rates into the US East Coast from Asia are at their lowest level of 2022, and three forwarders say they’re seeing booking demand growth slow even after importers shifted cargo away from the West Coast to the likes of New York and New Jersey and Savannah.

That coastal diversion will make any cargo slowdown to the East Coast hard to notice. The vessel backlogs and truck congestion at East Coast ports are expected to persist as freight gets diverted from West Coast ports amid ongoing labor negotiations there. Indeed, forwarders say that despite weaker spot demand, contract ocean freight rates are holding steady and capacity is expected to tighten again as back-to-school and holiday ordering kick into gear.

The average short-term rate for ocean freight, excluding surcharges, from Shanghai to New York–New Jersey dropped to $9,378 per FEU for the first half of July after peaking at $12,155 per FEU in early January, according to rate benchmarking platform Xeneta. An Atlanta-based forwarder who asked not to be identified said container carrier Zim Integrated Shipping filed a spot tariff for an Asia–US East Coast container move at $9,500 per FEU for July, indicating slack in the market. Jon Monroe, a consultant to non-vessel-operating carriers (NVOs) operating in the trans-Pacific market, said in an early July newsletter that the rate decline was due to US shippers delaying or canceling overseas orders.

“Many retailers stopped their orders or slowed their buying in June and July expecting to pick up their factory orders again in August,” Monroe said. “Warehouses are full, and BCOs [beneficial cargo owners] have already overspent and over-ordered in the first quarter of 2022.”

The US Census Bureau on Friday reported that the adjusted retail inventory-to-sales ratio, which measures the volume of goods in backstock relative to what’s selling, reached 1.2 in May, the highest since February 2021. The wholesaler -inventory-to-sales ratio of 1.26 for May is also the highest it’s been since February 2021.

A Boston-based forwarder who asked not to be identified said shippers of low-value furniture and home goods are seeing the biggest drops in ordering. But high-end home goods retailers are still ordering, as are fashion and clothing shippers, he said.

Shippers “don’t necessarily have too much inventory. It’s too much of the wrong inventory,” the forwarder said. “They slowed down buying. I think it’s going to be temporary. There’s plenty of demand, it just isn’t as frothy.” Orders could pick up again in August or September, the forwarder added.

The COVID-19 pandemic is also playing a role in the export slowdown. Monroe said factories in Shanghai “are taking more time to get back up to speed, and their delay to fulfill orders may bring rates down further.” He noted that the provinces surrounding Shanghai are also seeing COVID-19 outbreaks, but Monroe expects those provinces to “keep business as usual rather than follow the Shanghai model into lockdowns.”

Even with a summer slowdown, the US is importing more Asian-made goods than ever before. For the first half of 2022, containerized US imports from Asia grew 6 percent from the record-setting first half of 2021 and 31 percent from the same period in pre-pandemic 2019, according to PIERS, a sister product of JOC.com within IHS Markit, now part of S&P Global.

But the total monthly volume of containerized imports from Asia has essentially flatlined since March 2022, when it hit 1.74 million TEU, PIERS data show, the highest monthly volume recorded in five years.

In June, Asian imports of 1.686 million TEU were down 2 percent from May but up 12.7 percent year over year, making it the busiest June ever on the eastbound trans-Pacific. Volumes to the West Coast were up 12.4 percent, shipments to the East Coast rose 12.9 percent, and Asian imports through the Gulf Coast were up 16.6 percent from June 2021. No relief for East Coast ports Despite some shippers cutting back overseas ordering, US East Coast ports are not expected to see much relief from recurring congestion because other shippers are bringing in all they can, particularly in light of the as-yet-unresolved longshore labor talks on the West Coast. Although the prior West Coast contract expired on July 1, sources have told JOC.com that a new contract may not be ready until late summer or early fall.

In the first half of 2022, US East Coast ports handled 11 percent more Asian imports than they did in the comparable 2021 period, and volumes through Gulf Coast ports spiked 32 percent, while West Coast ports saw shipments from Asia grow just over 1 percent, according to PIERS.

“Many shippers have already rerouted cargo to East and Gulf coasts to avoid possible labor-related delays along the West Coast, causing the severe congestion at New York/New Jersey/Savannah,” according to a market update from a Memphis-based trans-Pacific forwarder.

“At the same time, carriers have also been managing their capacity ahead of any volume decline,” the forwarder added. Ocean carriers blanked 14 sailings to the US East Coast in June, and that number is expected to hit 16 in July, according to the update.

The Boston-based forwarder said beneficial cargo owners are moving some of their monthly contract freight on the spot market to take advantage of lower rates, and container lines have provided some cost reductions on contract freight. But shippers are keeping their monthly committed capacity in the event that supply tightens and rates begin to rise again, the forwarder said.

“The BCOs want to keep their space in case the supply is trimmed either by blank sailings or increased demand,” he said. “Using spot rates is dangerous because you risk that your minimum quantity commitment space will be taken away when the market changes.”