The world of international shipping, particularly in the major trans-pacific lane, is filled with complexity and dynamic variables at the moment. This is a brief overview of what we are seeing at the moment.
Rates from Asia to the U.S. are rising although import levels are still down from 2019. Carriers are becoming more aggressive in their general rate increases(GRIs) and we have seen three such announcements in the last 30 days or so. This unusual turn of events is caused by several factors and some newly found discipline by carriers to manage supply and demand.
Carriers cancelled over 150 sailings from February through April in response to the economic downturn caused by Covid-19. Since then demand has started to pick up as retailers and others started to replenish inventories in the U.S. Volumes are still behind last year but definitely increasing. Blank sailings in May and June decreased somewhat but carriers seem to like the market tightening which has allowed them to increase rates significantly. As previously reported blank sailings decreased to about 75 for May and June.
The combination of increased demand and continued blank sailings has resulted in tight space and over booking in some ports/lanes over the last 8 - 10 weeks. These conditions have allowed carriers to increase pricing whereas in the past the philosophy would have been to increase capacity to capture greater market share. Although carriers have struggled with the pandemic conditions they have shown greater discipline in managing capacity than in the past.
All this is happening against the backdrop of rising infection rates in the U.S. and more concern about the necessity of new restrictions, increased job loss and potential for further economic impact. It makes planning difficult for all in the supply chain. Furthermore the U.S./China trade and political tensions are causing rumblings about further tariff adjustments. Additionally, some of the exclusions from the Phase I Trade Agreement are set to expire in August. Note that carriers have yet to announce significant blank sailings for the summer but that could change. What's a shipper to do?
It is complicated and the implications can be different for different industries. For the short term we suggest early bookings (but reliable ones) to ensure space will be available and plan on cost increases through the summer unless some further dramatic changes occur due to virus related shut downs.
The good news is air freight has begun to resume closer to normal pricing as flights start to increase while the demand for PPE and medical supplies has leveled off a bit. Please be assured of our continued efforts to monitor these conditions and look for the best options available to keep your cargo moving.
Please stay safe and let us know if there is anything further we can do to assist you.