Transpacific Eastbound June Market Update

To Our Valued Customers: 

Part of why Laufer is “Built Different” is knowing what situations in the logistics and supply chain business will affect your bottom line. Below is a quick review of some recent market updates on the Transpacific Eastbound Market. At Laufer Group International, we’re here to help you navigate any issues you encounter and find solutions which provide the least impact to your business. Contact your Laufer sales representative for any inquiries or assistance.

Market Conditions

As we turn the page into June which historically is the start of the “busy season” in terms of imports as back to school goods begin to ship the market remains fairly soft.  Ocean carriers and shippers alike face a difficult challenge as the trade war plays havoc on the industry.  We expect a cautious approach from ocean carriers on capacity withdrawals and a great deal of emphasis placed on securing volume forecasts as we approach a very uncertain peak shipping season.  We can only expect an acceleration of blank sailing notifications if the industry forecasted volumes are lackluster.  As of today, only a handful of blank sailings have been announced for June, stay tuned..      

Market rates

Rates have increased to West Coast and the majority of US inland destinations by an average of $250 per 40’ on June 1st while primarily maintaining existing May levels on the East Coast.  Market rates have steadily dropped since mid-February however are meandering now close to the long-term fixed rate levels established on May 1st.  Expectations are for a fairly flat rate market thru June as back to school products hit the water while many other shippers still burn thru inventory before cutting orders on now higher cost goods.        

Blank Sailings

As of June 1st only a handful of blank sailing’s have been announced in the market.  Ocean Alliance has three blanks scheduled for June while THE Alliance has two blank voyages announced to the market.  As of now 2M alliance has not announced any capacity reductions to the market.  The majority of the blank sailings are on the West Coast sub-trades with only Ocean Alliance announcing an East Coast blank sailing which is scheduled for week June 18th.    

Panama Canal Draft Restrictions

The worst Panama drought in decades has resulted in 5 reductions on the maximum allowable draft thru the Panama Canal which primarily has impacted the largest vessels transiting the new lock system.   Ocean carriers have restricted container weights to varying degrees over the last couple of months.  A few carriers placed weight restrictions of 8 tons per TEU, requiring logistics mangers to find alternative gateways such as Suez services and moving product into West Coast distribution centers.  The good news is the worst is behind us as the draft restriction currently stands at 43’ as of 5/28 and conditions should steadily improve as the rainy season is underway. 

Airfreight Market

Airfreight capacity out of Hong Kong and China continues to be widely available as a direct result of trade tensions and high levels of inventory stocks in the USA. Asia-Pacific carriers have reported a 9.1% drop in volumes year-over-year and, when analyzing our YOY Laufer Airfreight rates, costs are as low as $0.60/kg (or 20%) below our costs this same time period last year. Any recent increases in freight charges have been related to fuel costs only.

There is speculation that air carriers are planning to cancel flights, especially freighter services, in effort to fabricate demand and upkeep current or greater rate levels. With another tariff hike looming, which is aimed to target many commodities that typically ship airfreight, we are expecting that June could potentially become an unusually-timed peak period. However, this will most likely be followed by a deep lull in the China and Hong Kong trade lanes.

On the contrary, TPE Airport is expecting severe capacity and rate hike issues as Chinese manufacturers shift production to Taiwanese facilities. Many U.S. importers are also planning to, or have already begun to, source their products from other countries in S.E. Asia putting pressure on both pricing, output, and infrastructure.

 

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