Market Rates and Trend Forecast

February 18th, 2019

Ocean Freight

Ocean freight rates declined approximately US$150/FEU to the USWC and USEC compared to the first half of February. We believe that part of the drop in rates is attributed to the fact that factories in China have just re-opened after the Lunar New Year holiday and production has just resumed.

U.S./China Trade Dispute – Update

After the latest round of negotiations in Beijing last week, it generated upbeat comments from both presidents as well as U.S. Trade Secretary Steven Mnuchin citing “big progress”, “achieving important progress in another step” and “productive meetings”. Although the official statement released by the White House had a contrasted tone to the comments, U.S. President Donald Trump said that he is considering extending the March 1st deadline for higher tariffs by an additional 60 days.

Both sides also agreed to continue discussions in the U.S. this week as they work toward a “memorandum of understanding” which could form the foundation of a deal between the two countries and pave the way for a meeting between President Trump and President Xi. We believe that this is positive progress towards settling the trade dispute as we continue to track progression of the upcoming meetings.

Post Lunar New Year Outlook

There seems to be a gap between U.S. retailers’ forecasts in imports in the first half of 2019 and those from the Trans-Pacific container lines. On one hand, U.S. retailers are forecasting a mid-single digit growth in imports which is also backed by forecasts from the Global Port Tracker that February imports will rise 5.7% year-over-year, 3.8% in March, 7.7% in April and 3.4% in May with indications that consumer spending has shown no signs of slowing and that U.S. containerized imports remains robust. If this forecast proves to be true, we could expect a rise in ocean freight rates.

On the contrary, ocean liners have planned for a significant drop in imports with 35 blank sailings from February into early March. This is a strong indication that ocean carrier forecasts are at odds with U.S. retailers and anticipate a drop in imports. Despite the announcing of blank sailings, ocean freight rates have continued to drop for the latter half of February. Regardless of which forecast turns out to be correct, much is dependent on the results of the U.S./China trade dispute that continues to be at the forefront of global concerns.

World Bunker Prices

World bunker prices have been rebounding since early January lows as many of the worries regarding demand has dissipated along with mounting signs of production cuts from OPEC producers. A continuous rise in bunker prices could prompt ocean carriers to revise their bunker charges.

Air Freight

Air freight rates from Hong Kong, Taiwan, Shanghai, Shenzhen and Guanzhou remains unchanged from the beginning of the month as factories in China re-opens after the Lunar New Year holiday. Airlines will begin to review rates based on demand in the upcoming days.