Asia-US container rates plunge; freight recession persists amid lack of peak season demand bump

HOUSTON (ICIS)–Rates for shipping containers from east Asia and China to the US plunged while spot trucking rates fell again as consumer demand for goods remains weak, and Canadian dock workers voted to strike beginning 1 July, highlighting this week’s logistic roundup.

Container rates continue to fall as there has been no significant increase in volumes this month, leading some market analysts to predict there will not be a seasonal demand bump in the short term.

Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, said rates have fallen after attempts by shipowners to boost rates earlier this month via general rate increases (GRIs).

Asia-US West Coast rates are 87% lower than the same time last year.

Rates to the East Coast are 80% lower than year-ago levels, and are being supported in part by slower transit times through the Panama Canal.

But recent rains in the Panama Canal region have allowed the Panama Canal Authority (PCA) to cancel additional draft restrictions meant to go into effect shortly which could have further limited the canal’s capacity, and possibly pushed rates up.

Levine said rates for US exports have also fallen recently, both on easing volumes and on competition among carriers to increase export bookings as import rates that typically subsidise backhaul costs lag.

US West Coast to Asia rates have fallen more than 20% since March although they remain 6% above 2019.

Container ships are relevant to the chemical industry because, while most chemicals are liquids and are shipped in tankers, container ships transport polymers such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets.

LIQUID CHEMICAL TANKERS
Rates for liquid chemical tankers from the US continue to soften after surging in the first quarter of 2022, when Russia invaded Ukraine which led to a shift in global trade.

Rates are well off the peaks seen in the first quarter of this year, but they remain higher than they were in late 2021.

Ship owners along the Transatlantic route said the market remains quiet for partial cargoes and they have been lowering freight expectations to secure business, or to allow traders an edge to generate some spot transactions.

There remains ample space in July to both Europe and the Mediterranean.

MORE LABOUR STRIFE
About 7,000 port workers at Vancouver and other ports in Canada’s British Columbia province are set to go on strike on 1 July, the International Longshore and Warehouse Union Canada (ILWU) confirmed on Friday.

The previous industry wide collective agreement between ILWU and the British Columbia Maritime Employers Association (BCMEA) expired on 31 March.

TRUCKING
The trucking market remains soft, leading one industry veteran to tell Craig Fuller, founder and CEO of supply chain market intelligence provider Freightwaves that “this is the most difficult market I have ever been in”.

During a webinar on the state of freight, Fuller said the present state of the industry is worse than in the financial crisis of 2008.

“I know this is all depressing and I wish I had better things to say – I would rather be the bullish person,” Fuller said. “But unfortunately, I do not have good news to share.”

Fuller said the market has added 25% capacity since 2019, but that demand has fallen so dramatically that it is more of a volume problem.

“Everyone was bullish about the second half,” Fuller said.

But he thinks retailers will be hesitant to build up inventories even after destocking.

“Right now, we are back to where we were, and they are starting to run a more normalised supply chain and facing these significant headwinds,” Fuller said. “There is nothing to suggest that they are going to be replenishing inventory. So, I think the second half story can be more challenging than the first.”

RAILROADS
Crews have been working in Montana to remove several rail cars that ended up in the Yellowstone River after a train derailment on 24 June.

The derailed cars, part of a Montana Rail Link (MRL) train, were carrying hydrosulfide, asphalt liquefied petroleum, molten sulphur and scrap metal, the US Environmental Protection Agency (EPA) said.

As of Friday, seven of the 10 railcars that entered the river have been removed.

In the US, chemical railcar loadings represent about 20% of chemical transportation by tonnage, with trucks, barges and pipelines carrying the rest.

And while most chemicals are liquids and are moved in tank cars, containers are used to transport polymers such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets.

Focus article by Adam Yanelli

Additional reporting by Stefan Baumgarten