Trans-Pacific prices surging during tariff pauseI
f Hunter S. Thompson had delved into the world of supply chain management, we might have had a book titled “Fear and Uncertainty in Ocean Shipping.” However, we don’t have that book, but we do have the reality of the supply chain’s struggle.
During the temporary respite in the ongoing China-U.S. tariff dispute, container rates on the Asia-U.S. trade have surged. This surge is driven by carriers’ demands for higher prices and their assessment of shippers’ desperation.
Peter Sand, the chief analyst at Xeneta, emphasized the significant impact of fear and uncertainty on global supply chains. He highlighted the struggle of shippers to expedite the movement of their goods after the temporary reduction in U.S.-China tariffs, and their willingness to pay higher rates to achieve this.
According to Xeneta data, the market average spot rates from the Far East to the U.S. West Coast increased by $298 per forty-foot equivalent unit (FEU) from $2,722 to $3,000 for the week that ended on Friday. Similarly, the Far East to U.S. East Coast spot rates rose by $186 per FEU, from $3,883 to $4,069, compared to the previous week.
Sand explained that carriers are pushing for substantial spot rate increases on trades from China to the U.S. on June 1. In response, shippers are once again being offered “Diamond Tier” services to secure space on ships. The success of carriers in achieving these rates will depend on the extent to which shippers are willing to push back.
Xeneta categorizes mid-high spot rates as those paid by shippers in the 75th percentile of the market. For the Far East to U.S. West Coast trade, these rates increased by $188 per FEU, from $3,012 to $3,200. For the Far East to U.S. East Coast trade, the rates rose by $205 per FEU, from $4,050 to $4,250.
Sand acknowledged the squeeze in capacity caused by carriers’ reduction in capacity during the period of 145% tariffs. However, he urged shippers to approach negotiations with caution and question the severity of the situation.
Sand suggested that the rate increases might be driven by a combination of a squeeze in capacity and market fear. He acknowledged that it takes time for carriers to adjust their capacity back to the China-U.S. trades, and that spot rates are likely to peak in the first half of June before softening later in the month.
