The provisional agreement between the USA and China to partially lift mutual tariffs will have a direct impact on freight rates.
The liner shipping companies are expecting the peak season to start early. Surcharges of $1,000 to $2,000 per 40-foot container are on the cards.
As the governments announced in a joint statement on Monday, the tariffs will initially be reduced by 115% for 90 days. According to the consulting firm Linerlytica, this step was higher than expected and comes at a time when there are increasing signs of an enormous decline in import volumes. “This trend is now likely to reverse,” it says, adding: “In the next three months, imports are expected to increase at a rate that could exceed the Covid-era peaks in 2021 and 2022.”
Surcharges will drive freight rates
The peak season surcharges will come into effect on May 15 and will drive freight rates for the Far East to the US West Coast back above the $3,500 per FEU mark. On May 9, the Shanghai Containerized Freight Index showed that the rate between Shanghai and the US West Coast increased 3% from the previous week to $2,347 per FEU. This was due to liner companies reducing capacity and pushing for a rate reset in the hope of resolving trade tensions between the US and China.
“Current spot rates have been largely stable at around $2,400 per FEU since the May 1 increase. However, they are expected to rise to over $3,000 per FEU in the coming weeks and further after June if demand picks up strongly as retailers restock following the sharp drop in freight shipments from China in April,” Linerlytica said. “Freight rates on routes outside the US should also benefit as shipping capacity shifts back to the transpacific.”
Significantly, freight forecasts for Asia-Northern Europe (EC) have reached their daily ceilings for all contracts over the next twelve months. The positive market sentiment should also spread to the charter market, where rates are expected to return to their previous strength as carriers reload tonnage withdrawn from the US over the past four weeks. (PL)
