New data suggests that Asia-U.S. West Coast shipping bottlenecks and high freight rates could be easing, according to a pair of reports from ocean shipping specialists who also warned relief could be short-lived.
Transit times for containers moving between ports in China and the U.S. West Coast dropped sharply in March, offering relief for shippers after two tumultuous years, according to new insights from Shifl. Freight rates on the principal trade lanes between China and the U.S. also softened on the back of significant declines in January and February, the digital freight forwarding platform noted.
Drewry’s composite World Container Index (WCI) fell 3.8 percent to $8,832.23 per 40-foot container or equivalent unit (FEU) for the week ended March 17, but was still 79 percent higher than a year earlier. The average composite index of the WCI for year-to-date was $9,360 per FEU, which is $6,231 higher than the five-year average of $3,129.
Freight rates on Shanghai to Los Angeles sank 7 percent to $10,154 per FEU and rates on Shanghai-New York dropped 5 percent to $12,276 per FEU, while rates on Los Angeles to Shanghai rose 1 percent.
A separate report from Container xChange noted that in the past month, average container prices have declined 12 percent to 18 percent at the Chinese ports of Shenzhen, Qingdao and Ningbo. The report said these prices are expected to decline for a few days or weeks as these ports in China experience restricted exports, while still importing.
“As Shenzhen city officials announced resuming of transportation and factories from Covid-induced lockdowns, industry analysts are positive about the minimum impact this this hiccup would have on the overall supply chain,” Container xChange said.
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“The biggest port complex in the U.S., Los Angeles-Long Beach, is finally showing signs of heading towards the ‘new normal,’ whatever that might look like in the post-pandemic landscape,” Shifl founder and CEO Shabsie Levy said. “Transit times and delays at the berth are both moving in the right direction, with gate-out times reaching the sorts of levels we were used to in the busiest months pre-pandemic.”
Shifl said the decline in freight rates is likely to continue as pressure for space subsides, especially given the already high level of retail inventories.
“There are signs that the worst is behind the trade between China and the U.S. West Coast, with transit times slashed by 21 days from the peak of 52 days in December to 31 days in March,” Shifl said. “Transit times from China to Los Angeles were down 20 percent from 39 days to 31 days between February and March. An overall reduction of 40 percent in transit times this year has put shippers back to where they were in September 2021, although transit times need to come down by another 30 percent to reach the lowest level recorded in May last year, but it will take time for the improvement to be reflected in the transit times.”
Dwell times in the ports were also improving, according to Shifl, with containers in Los Angeles-Long Beach and New York-New Jersey now taking four days to leave port compared to 11 days and five days, respectively, in October.
However, the Shifl report also noted that as a result of the zero Covid strategy in China, many factories reopen while others go into shutdown. Container xChange noted that lockdowns in China will not just slow down production slowdown, but cargo movement as well.
Once the Chinese ports fully resume operations, there will be pressure to deliver more containers, which will lead to a rise in average container prices in the next few months as the industry inches closer to the pre-peak season, Container xChange said.
“If persisted, the lockdowns will delay container movement significantly at these ports, which will have the maximum impact on the U.S. shipments,” said Dr. Johannes Schlingmeier, co-founder and CEO of Container xChange. “Looking in the long term, this will create more chaos as rates climb higher, capacity tightens and shipments delay. The shippers will need to plan their cargo much more in advance in 2022 than the last year, given the geopolitical scenario, the upcoming U.S. West coast contract negotiations in July and the rail route disruptions.”
The contract between the longshoremen’s union and the West Coast shipping ports is set to expire on July 1. Container xChange said based on the scenario that the containers from China will make their way to the U.S. ports around the same time in July and August–delayed by the China lockdowns–they would face worsened congestion at the U.S. West Coast ports, as well as at the East Coast ports, which are already struggling to handle the traffic.
“In the coming months, the transpacific route will witness a major disruption, and shippers must think ahead and prepare for the worst as port congestion worsens, freight rates shoot up and capacity deteriorates,” Schlingmeier added.