Ocean rates out of Asia were overall stable this week, though prices to the US West Coast decreased 3%, and are now nearly 60% lower than this time last year when rates began their extreme peak season spike.
But the significant drop in ocean rates over the last two months is one of several conflicting indicators of what the future may hold: Falling ocean rates, growing inventories and climbing inflation suggest a slow-down in demand, while still-strong consumer spending and ocean volumes in June, and anticipation of declining but still-strong volumes over the coming months point the other direction.
One reconciliation may start with the extreme starting point for many of these indicators. Asia – US West Coast ocean prices, for example, have fallen more than 50% since the start of the year, but are still more than 4.5 times their level in July 2019. Some decrease in consumer demand, together with the high starting point and the fact that many importers shipped peak season orders earlier in the year, could account for falling rates and volumes that nonetheless remain high by pre-pandemic standards.
Whatever the underlying demand, another driver keeping rates elevated (relative to the norm), is persistent congestion. Ports are still backlogged not only in Europe and the US – especially the East Coast – but increasingly in China too, as COVID measures and bad weather slow things down.
Widespread labor issues are another factor either threatening to disrupt or already slowing operations. The Biden administration intervened to prevent a rail strike this week, even as a backlog of rail-bound containers is the biggest problem in LA at the moment. Truckers protesting a new California law limiting options for independent operators blocked a terminal at the Port of Oakland, while another port worker strike in Germany disrupted operations there as well.
Meanwhile, port congestion, together with strong demand for the different mix of goods shipped from Europe has kept transatlantic rates climbing. North Europe – US East Coast rates are currently more than $8,000/FEU, and 35% higher than at the start of the year.