Market Rates and Trend Forecast

February 1st, 2019

Ocean Freight

Ocean freight rates to the USWC declined approximately US$200/FEU to the USWC while rates to the USEC dropped on average US$150/FEU compared to the latter half of January. We would like to focus on topics beyond the Lunar New Year as many factories in Asia are now closed for approximately 2 weeks.

Post Lunar New Year Outlook

U.S. imports from Asia rose roughly 22% in the month of December (year over year) which is an indicator that the trans-Pacific peak season was stronger than what many had initially expected. However, the outlook beyond the Lunar New Year is modest at best with some U.S. retailers showing signs of an import slowdown. Year over year imports for the month of January is expected to drop 2.1%, 1% in February, and 1.7% in March (according to the Global Port Tracker). The overall market sentiment leads Laconic to feel that there may be softer volumes after the Lunar New Year.

U.S./China Trade Dispute – Update

Thursday marked the second day where U.S. Trade Representative (USTR) Robert Lighthizer was leading negotiations with Chinese Vice Premier Liu He. Although it was reported that the two sides had engaged in intense and detailed discussions which signals progress, it can only be described as “limited” at best due to the structural issues that continue to divide the two nations from an agreement.

U.S. President Donald Trump has also disclosed that he will send Treasury Secretary Steven Mnuchin and USTR Robert Lighthizer to China in mid-February for the next round of discussions. Chinese officials have also extended an invitation to President Trump to meet with President Xi in February. While progress has been made with the next round of discussions in the pipeline at the highest levels, there are skeptics that remain wary that the core U.S. concerns will not be addressed with the remaining time before the March 1st deadline.

Ad Hoc – Potential Oil Price Fluctuation Factors

Laconic has also began to actively monitor significant factors that can potentially impact the price of oil which includes: a possible regime change in Venezuela, U.S. sanctions on Venezuela, OPEC production volume changes, waivers on Iranian oil exports (sanctions), and continued growth of U.S. shale oil production. On the latest news, after U.S. led recognition of Juan Guaido as the legitimate President of Venezuela, RBC Capital Markets forecasts an additional drops of 300,000-500,000 barrels of oil per day on top of the already declining Venezuelan oil industry.

Speculation

The trans-Pacific post Lunar New Year outlook is rather murky given that there is only one month left for discussions between the U.S. and China to settle their differences, a stronger than expected peak season and a relatively pessimistic market sentiment.

Air Freight

Air freight rates have all been declining effective February 1st, 2019 given that most factories in Asia are now closed for the Lunar New Year and that most of the pre-Lunar New Year cargo have already been shipped.

Hong Kong

Rates in Hong Kong have dropped approximately 7-8%.

Taiwan

Air freight rates in Taiwan have also dropped between 5% and 10%.

Shanghai, Shenzhen, Guangzhou

Rates have dropped on average 10% for February although airlines will be reviewing the rates after the Lunar New Year holiday depending on demand.