August 10, 2016
Transpacific Eastbound Market Update
To Our Valued Customers:
Market Conditions – What’s happening with Capacity and Demand? Carriers continue to look for ways to idle excess capacity in the TP trade to match demand forecasts through the end of this peak season. Lackluster demand has prompted some to idle additional capacity even during the summer months, a time when carriers are usually flexing up capacity to meet seasonal demand. According to Drewry Research Services, more than 300 containerships with a capacity close to 1 million Teus are currently idled in August – 4 times more than in the previous two Augusts.
Just last month, the G6 Alliance decided to cancel their CC1 Service from China to the USWC and the Ocean 3 Alliance idled their Manhattan Bridge service.
Due to reductions in capacity in the Asia-US market, especially to the US West Coast, the trade has experienced tightness in space we haven’t seen since early 2015. Where we have seen the most capacity cuts and consequently the area where space is the tightest is to LA/LGB and Oakland. Space continues to be tight in Ningbo, Shanghai, Qingdao and Yantian.
July 15 Peak Season Surcharge: Due to the above, TSA carriers imposed a PSS effective July 15, 2016 in the amount of $360/20’, $400/40’, $450/HQ, and $510/45’. While this was somewhat mitigated, carriers were successful in increasing spot rate levels in the market as space became tighter in early July.
August 15, 2016 “Second Stage” PSS: Carriers have filed a Second Stage PSS to go into effect August 15, 2016 but this will be largely unsuccessful.
G20 Summit Reminder: The G20 Summit will be held in Hangzhou, China between September 4-5, 2016. We have shared in the past what we have learned regarding factory closures leading up to the Summit and those are now fully in place. There are also trucking restrictions in Zhejiang Province (Hangzhou and Ningbo areas) from mid-August through the G-20 Summit which will impact factories’ ability to receive and ship merchandise.
Due to capacity reductions, G20 impact on Shanghai and Ningbo, October 1-7 National Day holiday, and strong booking forecasts for September, we do expect space to get tighter for the 4 weeks between the G20 Summit and October 1. We expect carriers to be successful in moving spot rates up in September through the below previously announced GRI:
September 1, 2016 General Rate Increase: Carriers have announced yet another GRI to go into effect September 1, 2016 as follows:
US WC, EC and all IPI Destinations: $800/20’ $1000/40’ $1125/HQ $1270/45’
Our #1 priority as always is to help maintain our customers’ competitiveness, to keep your cargo flowing as quickly and as consistently as possible, and to continue to communicate effectively along the way. Our nimbleness, market awareness, and “Built Different” philosophy enable us to do this - as your partner.
Thank you very much for all your support.
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