Transpacific Eastbound Market Update
May 24, 2018
To Our Valued Customers:
Market Conditions – Container volumes rebounded in May with many ocean carriers reporting strong vessel utilization on most sailings with Pacific Northwest services being an exception. The stronger than anticipated volumes looks to continue into June based off current booking forecasts with carriers. June historically is an “off-peak” month in terms of container volumes and the fears of an escalating trade war with China could be one of the reasons for the strong pre-June volumes. Manufacturing in China was also slow to comeback online after the late CNY which coupled with ongoing domestic truck capacity concerns could speculatively contribute to the stronger than anticipated May and June volumes.
Potential Market Disruptions - An India nationwide public port work stoppage is looming on May 28th that will impact supply chains globally if talks scheduled for Friday May 25th breakdown. The unionized dockworkers are seeking wage improvements and better fringe benefits that was suppose to be addressed during 2017 negotiations. Stay tuned.
Higher fuel prices to driving up costs - Soaring fuel costs with oil approaching $80 a barrel in May will impact 3rd quarter BAF prices on long term fixed rate contracts and impact market rates in the short term. Fuel costs YTD have increased by approximately 30%. Two carriers (MSC and Maersk) have announced to the market a global Emergency Fuel Surcharge effective July 1, 2018 to offset the higher costs (Maersk has filed an Emergency Fuel Surcharge effective July 1, 2018 of $60/20’, $120/40’, $120/HQ, and $120/45’ in the TPEB trade).
Market capacity - Vessels upsizing on the Asia to North America trade will continue thru the summer months as new ultra large vessel deliveries enter the market. The large vessels are mostly deployed on the Asia Europe trade which results in a “cascade effect” of somewhat smaller vessels moving into the Asia USA trade. The overall capacity increase on the Transpacific will be 8-9% however with containerized volume growth anticipated around 7% a slight gap in supply and demand will persist.
ONE and Challenges: With the merger of NYK, Mitsui OSK, and Kline into one company called ONE (Ocean Network Express) completed in April, 2018, there are still concerns that ongoing service challenges that the market is experiencing with ONE will continue through the summer and fall. ONE is an important component of Laufer’s portfolio and will continue to be in the future, but we are watching their performance carefully to determine where to best utilize their services and access their capacity.
General Rate Increases announced in the market - June 1st 2018 of $1000/40’
June 15th 2018 of $800/ 40’
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