Market Rates and Trend Forecast

August 1st, 2019

Ocean Freight

Ocean freight rates for the first half of August to the USWC remains little to no change while rates to USEC increased by US$100/FEU compared to the latter half of July. Spacing remains tight despite the little change in ocean freight rates due to capacity management from ocean carriers while demand remains relatively soft. Concerns over MSC’s temporary C-TPAT suspension has also led some cargo owners to avoid using MSC which further exacerbates the tight spacing situation.

Peak Season Capacity and Spot Rates

Although U.S. imports from China declined 5% during the first half of the year and year-to-date import volume growth from Asia is lagging previous years, space on vessels departing from Asia are beginning to tighten. Laconic expects this year’s peak season capacity to remain tight. Since last year, carriers have increasingly utilized void sailings and extra-loader vessels to control spot rates.

Speaking with various ocean carriers, Laconic is led to believe that freight rates may continue to remain soft this month as a result of weak bookings at the moment. Despite being informed that there are currently no plans for canceled sailings, we should not discount the chances of cancelled sailings or the risk of spot rate volatilities due to uncertainties.

U.S./China Further Escalations

On Thursday, U.S. President Donald Trump announced that he would impose a 10% tariff on the remaining US$300 billion in Chinese imports that will come into effect on September 1st. The decision to walk away from the G-20 Osaka truce makes it almost certain that China will retaliate. Frontloading of cargoes to beat this way of tariffs is not possible given that the implementation is 30 days ahead. It appears that trade uncertainties and tensions will continue to roil businesses and the shipping industry.

MSC 90 C-TPAT Suspension – Update

As MSC continues to work with the appropriate authorities to reduce it’s 90-day C-TPAT suspension, a number of cargo owners have been avoiding the use of MSC in favor of other carriers. While this year’s peak season appears to be softer than prior years, this temporary shift away from MSC may lead to overbooking on other carriers leading to potential container rollovers.

Typhoon Season

The typical typhoon season in the Pacific region runs between May and October of each year peaking in August and September. Such storms can cause disruptions to sailing schedules, vessel berthing and delays as ports respond to weather conditions and may suspend operations due to safety concerns. It is important to take these potential delays into consideration. Most typhoons that have warranted a “Tropical Cyclone Signal No. 8” or above warning from the Hong Kong Observatory has taken place in August or later where ports, terminals and most services in Hong Kong are halted for safety reasons. Most Chinese municipalities have similar warning systems in place.

Air Freight

A cloudy economic situation has led to a drag on air cargo business which has put pressure on freight rates. To prevent freight rate deterioration, some carriers have chosen to ground some freighter planes to better match capacity with demand (similar to ocean carriers). Such weakening sentiment has negatively impacted many Asian airlines with little signs of a rebound in the upcoming months. Lackluster business sentiment was one of the primary causes leading into demand for air shipments.

Hong Kong and Taiwan

Air freight rates in Hong Kong and Taiwan remains unchanged from late July levels while airlines are continuing to assess and adapt to market conditions.

Guangzhou, Shanghai, Shenzhen

Freight rates in Guangzhou, Shanghai and Shenzhen increased 3 to 5 percent as cargo volume remains relatively stable.