US-China trade rates spike as transatlantic rates drop

A string of General Rate Increases (GRI) starting in March-April hasn't helped the container spot rates. The Shanghai Composite Index which had a momentary upside to US$1,028 slipped back to,979 even as its longer-term counterpart in the Chinese Containerized Freight Index (CCFI) fell further to 921, lurking at a three-year low, equivalent to June 2020 levels.

The Contract Market rates indicated by Xeneta too indicated tumbling on the latest monthly numbers of May 2023, while the mixed reactions in spot market across trade lanes are seen cancelling each other out. The result, the Drewry's World Container Index had yet another flattish week to end at US$1,681 which while also being at a three-year low, has seen better rates pre-pandemic.

Thanks to the Panama Canal drought and the strike action visible early in the week on the US West Coast, the China-US trade saw rates storm higher with Shanghai- Los Angeles (US West Coast) putting up a 6% appreciation to end at US$1,896. With a lower base, rates on Xeneta show an appreciation of about 16% on the trade lane with the latest quote at US$1,501 while FBX reports an uptick too, for the trade lane. The China-US East Coast Rates, as reported by Drewry too witnessed a 5% appreciation to US$2,975.

However, on the flip side, the transatlantic rates slipped with the head-haul rates losing 9% to end at a 26-month low while the backhaul rates fell by 2%. There was an added contribution on the downside by China-Europe head-haul rates which fell below the US$1,500 mark to end at US$1,452 losing 6% in the process.

The Logistics Manager Index touched a contracting territory for the first time in 6.5 years with transportation prices at an all-time low along with the mother index in the US. Inventory levels in the US are seen declining faster too. However, the US West Coast situation is still seen to affect trucking and rail in the region, with rail shipments reportedly paused.

The congestion build-up is said to go up gradually and as of now, Seattle seems to be impacted the most at seven days. With the GRI effect nullified and contract rates negotiated at lower prices, a keen eye needs to be dedicated to the possible woes of supply chain build-up in the US West Coast, which can spill over gradually, if not resolved.

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