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Trans Pacific Ocean Freight Market Update

The 2018 Trans Pacific peak season has continued to break away from conventional trends as we have seen shippers importing into the US at record levels ahead of the Trump administration tariffs deadlines. In addition to the tariffs, there are other significant factors at play fueling this unprecedented market, including: a robust US economy, crude oil cost, and carrier capacity management.

In a traditional peak season, we would often see the market begin to stabilize in October; however, this year we have seen the opposite with prices continuing to increase and space becoming even more scarce. If October comes in at the expected volume level, it will be the fifth consecutive month for US-based ports to exceed the top month in 2017 for TEUs (Twenty-Foot Equivalent Units).

This volume increase, paired with a capacity decrease, has resulted in China-to-US rate levels hitting five-year highs. The average rates per TEU to the US West Coast are up 74% from the same time last year and rates to US East Coast are up 45%.

Ocean carriers are taking action to address the demand surge, including the reduction of idle fleet which was at 5.5% (or 580,000 TEUs) after this year’s Golden Week, compared to last year when the idle fleet was at 14% of total capacity or 1.6 M TEUs. In addition, some carriers are introducing extra loaders which will operate at a cost premium to contracted prices, simply to meet accelerated demand. This week alone saw 60,000 additional TEUs on extra loaders servicing both Long Beach and the US East Coast, with spot market rates moving to yearly highs in both markets.

Peak season will continue through November with volume expected to stay strong ahead of the looming 25% tariff increase scheduled for January 1, 2019.  If your imports are not on US soil by the tariff implementation deadline, the entry will carry the full tariff (if implemented). If you are racing the tariff clock, please make sure that you leave plenty of time for your shipments to load and ship to the final destination.

By late December, and depending on the tariff response by President Trump, we should start to see some additional pickup in the Trans Pacific Eastbound trade with rates edging up into Chinese New Year, which arrives early this year on February 5, 2019 – the year of the pig.

It is important to communicate with your RIM team members on any special or extraordinary shipping requirements you may have during this period.  Shipment forecasting regarding your import requirements are greatly appreciated during this moment of volatile rates and market shifts.  We thank you for your patience and understanding during these last few months. We all hope and pray for a less exciting and less challenging year in 2019.