October 5, 2018

Transpacific Eastbound Market Update

 

To Our Valued Customers: 

Market Conditions Traditional peak season volume related to the holiday shipping season, combined with importers looking to beat the uncertainty over tariffs, meant container volumes remained strong through September. This strong demand caused spot market rates to increase significantly and they continue to remain elevated. Market demand is expected to remain strong through the third week of October as the carriers work to clear the backlog of containers after China’s Golden Week holiday, October 1-7. Once the backlog is cleared, we would normally expect the demand to decline. But, due to the recent tariff announcements, there is speculation that strong demand could continue beyond October and through the end of the year. Although it will remain to be seen if production deadlines can be moved forward, importers racing to beat January 1, 2019, tariff increases could put significant pressure on the market.

China Tariffs – As the trade war between the USA and China continues, the Trump administration announced on September 17 that it would impose a third round of tariffs against China on some 5,700 HTS classifications. This third round of tariffs will add 10% on top of the existing duty rate for all impacted items beginning September 24. Additionally, tariffs will increase from 10% to 25% beginning January 1, 2019. The Trump administration has also proposed a fourth round of tariffs If they were to move forward with a fourth  round it would likely cover everything else not covered in the previous three rounds. There is no official confirmation from the administration if or when this fourth round could go into effect.

Blank Sailings & Winter Programs -Multiple blank sailings have been announced by the carriers around China’s Golden Week holiday as carriers make their annual transition to their winter programs. Historically, this transition does not have much impact on the market as these winter programs mirror the normal declines in demand during the fourth quarter. However, the impact of the looming tariff increase is creating uncertainty in the market. As mentioned above, there is speculation that many importers will race to be beat the January 1, 2019, tariff deadline and have a significant impact on the normal fourth quarter market demand. This, coupled with the reduced capacity of the winter programs, could make for very tight conditions, especially to the USWC. To be safe, we suggest that you advise your Chinese suppliers to book as early as possible. 

Fourth Quarter BAF & LSF –As oil prices trade at a nearly four-year high, the increased average fuel costs in the third quarter caused carriers to take a small increase to their fourth quarter BAF and LSF surcharges. For the specific impact on your shipments, please contact your local Laufer representative for an updated quote. 

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