To Our Valued Customers:
Market Conditions – The additional extra loader vessels have yet to take the wind out of the soaring market rates as demand remains very strong. We were expecting market rates to cool off somewhat in the 2 nd half of August with the added capacity from extra loader vessels however this is not the case. Demand in a variety of sectors remains strong, PPE products, furniture, and other home goods are leading the surge which is expected to continue through the remainder of peak season.
Market Rates Reach 10 Year High – Ocean carriers have announced another general rate increase effective August 15th with an average increase of $400-$500 per 40’. Strong market vessel utilization is driving the mid-month GRI. The additional increase will be 4th GRI since July 1st which has driven rates o 10-year highs. September historically is the strongest peak season shipping month of the year and with China National Holiday looming that will shut down production from October 1st through October 8th another rate increase on September 1st is quite possible if not likely.
Import Surge Likely to Continue Through September – Due to the global pandemic many shippers had a foggy forecast on predicting how orders will look for peak season 2020. Now that peak season is upon us and volumes are being realized, import surge that started back in July looks to continue through the remainder of peak season. Big box importers and e-commerce market places are now forecasting stronger than expected volumes through early fall. Other seasonal importers that move the majority of products in August and September such as holiday decorations, giftware, and accessories expect similar volumes in comparison to last year or slightly lower. With very few blank sailings left in the market and carriers adding extra loaders, the expectations for a busy fall seems likely.
4th Quarter Expiring Tariff Exemptions – With Senate and Congress in summer recess and other daunting agenda issues on the table when back it’s unlikely we see exemption extensions on products with expirations in September and October. List 1 that includes products such as machinery and mechanical appliances will see expirations in September and October. Expectations are for imports to surge on such products to beat the clock and avoid tariffs up to 25%.
Fixed-Rate Capacity Crunch – As market rates continue to increase it’s becoming increasingly difficult for shippers to secure fixed rate capacity as the rate differential is astronomical. The market rate from China to LAX is more than double the cost of a fixed rate on a 40 container. We can only assume ocean carriers will strictly adhere to MQC with shippers and force additional volumes onto market-rate pricing even if booked for the same vessel. We have all seen this movie before!
Equipment Shortages – A few China ports are starting to report shortages on equipment, especially 40’HC and 45’HC containers. Shanghai, Ningbo, and Yantian are reporting spotty shortages which vary depending on ocean carrier. We can expect sporadic issues on equipment to continue through peak season and potentially worsen if congestion is realized at US ports that can delay the turnaround of empty equipment back to Asia.