Despite Red Sea crisis inflation shock, ocean freight rates are headed down on key China-US trade route

A
slowdown
in
demand
for
products
manufactured
in
Asia
has
ocean
carriers
reducing
freight
rates
on
shipping
routes
from
China
to
the
West
Coast
and
canceling
sailings,
despite
elevated
fears
about
a
new
round
of
supply
chain
inflation
caused
by
the

Middle
East
conflict.

The
cargo
price
cuts
come
despite
the
Houthi
rebel
attacks
in
the
Red
Sea
which
les
some
shippers
to
recently
raise
container
fees

as
high
as
$10,000.
Shipping
giants
including
Maersk,
which
have
had
to
halt
shipments
through
the
Red
Sea
in
recent
weeks,
continue
to

warn
of
the
ongoing
threats
to
the
global
economy.
As
the
U.S.
and
its
allies

launch
attacks
against
the
Houthis,
fears
are
running
high
about
an

inflation
spike
for
the
global
supply
chain,
but
the
latest
shipping
contract
data
shows
that
on
some
key
routes
that
is
not
yet
happening.

Rates
for
new
ocean
freight
contracts
scheduled
to
go
into
effect
Monday,
January
15
for
many
carriers
were

expected
to
rise
above
$5,000,
but
a
new
advisory
to
clients
from
Honour
Lane
Shipping shows
Asia
to
U.S.
West
Coast
container
prices
coming
in
below
that
level
—
U.S.
East
Coast
routes
remain
higher,
at
$6,500
to
$7,000.

Alan
Baer,
CEO
of
logistics
company
OL
USA,
said
there
appears
to
be
a
growing
divergence
between
the
shipping
rates
to
the
U.S.
coasts.
“U.S.
West
Coast
rates
have
rolled
over
and
are
decreasing,”
Baer
said.

More
shippers
were
expected
to

start
avoiding
the
East
Coast
and
favor
the
West
Coast
ports
as
a
result
of
the
Middle
East
issues.
Diversions
from
Egypt’s
Suez
Canal,
which
feeds
into
the
Red
Sea,
and
the
rerouting
of
vessels
around
the
Cape
of
Good
Hope
adds
two
to
four
weeks
to
a
round-trip
voyage,
according
to
Honour
Lane
Shipping,
and
ocean
carriers
need
more
ships
on
each
Asia-East
Coast
route
to
maintain
an
efficient
network
schedule.

But
Baer
says
the
data
does
not
support
the
view
that
the
situation
has
shifted
more
trade
to
West
Coast
routes. “Perhaps
the
diversion
away
from
the
U.S.
East
Coast
has
not
prompted
as
significant
an
increase
to
U.S.
West
Coast
volume
as
first
anticipated,”
he
said. 

Baer
says
there
could
potentially
be
more
cancelled
sailings
to
come
in
February
to
help
balance
actual
supply
and
demand.

Still,
rates
are
in
flux,
reacting
to
a
very
sensitive
market,
and
pricing
pressures
will
remain,
according
to Goetz
Alebrand,
head
of
ocean
freight
for
the
Americas
at
DHL
Global
Forwarding.

“Ocean
freight
rate
adjustments
are
made
in
the
same
each
week
nowadays,”
said
Alebrand.
“It
could
be
seen
as
an
adjustment
to
supply
and
demand. We
expect
this
situation
to
remain
fluid
but
generally
see
more
chances
for
rates
to
remain
elevated.” 

The
ongoing
drought
issues
at
the
Panama
Canal,
which
this
week
led
Maersk
to

re-route
some
cargo
by
a
“land
bridge,”
are
adding
to
the
global
freight
complexities.

C.H.
Robinson
describes
the
current
global
ocean
shipping
situation
as
one
in
which
clients
should
move
quickly
to
secure
space
in
“a
competitive
capacity
market,”
according
to
a
recent
commentary
from
Matthew
Burgess,
vice
president
of
global
ocean
services,
and
it
recommends
booking
at
least
three
to
four
weeks
in
advance
for
ocean
freight
on
all
routes.

Under
the
U.S.
Shipping
Act,
all
ocean
carriers
have
to
give
30-day
notice
before
they
can
impose
surcharges
or
GRIs,
but
the
Federal
Maritime
Commission
has
waived
this
for
shipments
from
Asia
to
the
U.S.
being
rerouted
around
South
Africa’s
Cape
of
Good
Hope.

Maersk
declined
to
comment
on
new
contract
rates,
citing
a
quiet
period.
CNBC
reached
out
to
other
major
ocean
carriers
for
a
comment,
but
did
not
receive
immediate
responses.

A
decrease
in
Asia
manufacturing
demand
is
the
reason
behind
a
decision
from
MSC,
the
world’s
largest
carrier,
to
cancel
sailings.
“MSC
plans
to
adjust
its
capacity
in
line
with
the
slowdown
in
demand
on
Asia
–
USA
and
Canada
routes
due
to
the Chinese
New
Year
period,”
it
said
in
a
recent
advisory
to
clients.
 

The
reduction
in
China
freight
demand
is
in
line
with

a
CNBC
Supply
Chain
Survey
forecast
for
2024
in
which
logistics
executives
who
manage
freight
manufacturing
orders
and
transportation
—
including
those
at
C.H.
Robinson,
SEKO
Logistics,
DHL
Global
Forwarding
Americas,
Kuehne
+
Nagel,
OL
USA
and
ITS
Logistics
—
warned
of
a
decrease
in
demand
ahead
of
Lunar
New
Year.