China-U.S. ocean rates went unchanged for a third consecutive week, even as China’s manufacturing came back online. A Golden Week record high level of ocean capacity was kept available over the break, possibly in response to regulator pressure to reduce cancelled sailings, and likely helped keep rates level.
Still, ocean rates remained at nearly 200 percent over last year’s prices. Record levels of available capacity over Golden Week and regulatory pressure likely contribute to the steady rates.
Strong volumes are expected through October and may even extend into next year, if retail pre-orders for spring shipments are an indication.
E-commerce continues to drive demand, including from many SMB importers. But in addition to high freight rates and impacts from Amazon policy changes, SMBs on Freightos.com who shipped a record number of orders in July and significant year on year increases since April are now expecting more expensive and less reliable peak season fulfillment to their customers as well.
- China-U.S. West Coast prices (FBX01 Daily) dipped by 1% to $3,847/FEU. This rate is 195% higher than the same time last year.
- China-U.S. East Coast prices (FBX03 Daily) went unchanged at $4,680/FEU, and are 91% higher than rates for this week last year.
Any mid-month rate increase is still expected to be minimal, even as current demand is keeping space on the now-full and even extra supply of ships extremely tight. The resulting equipment shortages and poor reliability are still a big problem for shippers.
After a record volume of global imports to the U.S. in August and double-digit annual volume gains in September, the NRF is predicting October volumes to be only 1 percent behind last year. And though they expect a drop off starting in November – possibly impacted by the delay of additional government stimulus. – there are other indications that restocking and pre-ordering of spring shipments ahead of Chinese New Year in February could keep volumes elevated into next year.
The volume surge has been partially driven by a shift to e-commerce, including from many SMB e-commerce sellers. SMB importers using the Freightos.com marketplace to book freight shipped a record number of monthly orders in July, and a 24 percent increase in August compared to last year. But these small businesses not only have had to contend with elevated ocean and air prices and shifting policies from distribution channels like Amazon, but now will face higher costs and less reliability during peak season as they try to fulfill customer orders as well.
The International Trade Association identifies 97 percent of U.S. importers as small or midsize businesses. As e-commerce grows and import barriers drop, this percentage will likely increase. However, data this year suggests a mixed bag for importers:
- Small importers were able to make supply chain decisions to capitalize on the e-commerce boom, booking 24 percent more shipments in August 2020 compared to August 2019.
- They were able to use this same flexibility for selecting products with very rapid inventory shifts (within one month, 7 percent of all imports were PPE-related).
- However, these same vendors were left exposed to distribution policy changes made by fulfillment channels, like two Amazon policy changes (in March and August) that led to dramatic declines in Amazon-related imports.
- While some more savvy small importers already use multiple fulfillment channels, the majority (81 percent) use only one. The most common channel used is Amazon FBA, which is the only distribution channel used by some 40 percent of small importers using the marketplace.
- These importers were exposed to the same import price fluctuations as larger businesses, although often with slimmer margins. For example, ocean rates from China to the U.S. West Coast are now 3x higher than at the same time last year, while air cargo rates from China to U.S., driven by fewer passenger flights, grew more than 300 percent from March to May.