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Trans-Pacific Forwarders Ease Premiums as Capacity Loosens

Capacity in the eastbound trans-Pacific has loosened slightly in recent weeks, reflected by forwarders pulling back on premiums for guaranteed loadings and even carriers offering a handful of more slots to importers.

But the easing is simply a dip in trade lane volume before an expected uptick in the coming weeks, container lines and forwarders told The moderate volume fluctuations and a barometer showing orders from North America are up suggest that Asia imports are simply in the latest trough before a coming crest.

“In the past few weeks, we have seen some carriers offer us small increases in space, maybe 10 or 20 containers here and there out of multiple ports in Asia, but it's the first time we've seen that in two years,” a major shipper told this week.

Increased lockdowns in China could create even more choppiness in weekly Asia import volumes, as some shippers have seen factory production stall due to a lack of raw materials and components, carrier executives and forwarders tell, adding others have had no issues with inputs at their factories. Ningbo and Shanghai have been hit hardest, with the shipping industry watching how Beijing will manage its recent COVID-19 flareup.

Chinese exporters could produce another bullwhip when stalled shipments start moving again, with companies warning of a surge of delayed shipments.

And while Maersk said the lockdowns in China have hit, but not devastated, Shanghai exports, the container line in a first-quarter earnings statement Wednesday warned the lockdowns “may worsen the congestion environment in coming quarters ...”

There has been a slight easing of demand due to the shutdown of some factories during the two weeks of Chinese New Year celebrations in early February, followed by the COVID lockdowns, forwarders and container lines told One carrier executive likened the flow on the eastbound trans-Pacific to quarters in a basketball game in which one teams scores in the double-digits and then holds back the following quarter.

It is during the trough in demand when carriers find sprinklings of slots out of Asia, and on a week-to-week basis, there have been plenty of them. US imports from Asia between January and the week ended April 23 on a week-to-week basis fluctuated between increases as high as 32 percent and declines as steep as 67 percent, according to PIERS data through March and preliminary readings in April.

Asia imports to the US this year through April 23 were up 7.6 percent compared with a year ago.

Likewise, as tracked by Infor Nexus, the number of Asian order transactions of US and Canadian imports has fluctuated month to month, with the number of transactions last month up 10.6 percent compared with the same period in April 2021. However, within the first four months of this year, the number of China transactions were down 18 percent.

Vietnam has been the biggest beneficiary of orders shifting from China, with India, Bangladesh, Indonesia, and Cambodia also benefitting to a lesser degree.

Booking demand out of Shanghai was trending downward since February, weeks before the city went into lockdown in mid-March. Since February, booking demand tracked by analysts out of Shanghai has hovered slightly below 10,000 TEU monthly. Conversely, volume out of Ningbo, which is also struggling with lockdown-driven delays, has been rising since February, reaching 14,277 TEU, the highest monthly order in at least 12 months.

The divergence between the two congested Chinese ports is partly due to how electronics exporters clustered outside Shanghai are unable to secure key components, dampening production and exports through the port. Apparel exporters, which use Ningbo as a gateway far more than Shanghai, have had less input issues that would slow production.

While three forwarders told they are no longer applying premiums on US imports from Asia, which ranged from $1,000 to as high as $5,000 in the fall, spot rates are holding firm. Compared with five weeks ago, the cost of shipping an FEU this week from Asia to the US West and East coasts is up nearly 1 percent and 1.3 percent, respectively, according to Xeneta, an ocean freight rate benchmarking platform. On a year-over basis, FEU rates to the West and East coasts are up more than 120 percent, with this week’s readings at $8,804 and $11,935.



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