Asia-US Container Freight Rates Fall In Off-Season
Freightos expects front-loading ahead of Lunar New Year to drive down prices. While the slow shipping season ahead of Lunar New Year has depressed container freight rates from Asia to the US coast, there are still many factors that affect freight rates in the long term.
According to Freightos’ Baltic Index, rates between Asia and the US West Coast fell 10% to $5,321 per 40-foot equivalent unit in the week ending January 17. Rates between Asia and the US East Coast fell 3% to $6,715 per 20-foot equivalent unit.
“As the Lunar New Year approaches, freight rates are falling everywhere except Asia,” Freightos research director Judah Levine wrote in an update. “Part of the price decline may also be due to increased competition among carriers as new (carrier) alliances are about to be formed.
“Trans-Pacific freight rates may recover slightly after the Lunar New Year due to delays on some cargo that was not shipped before the holiday, although delays and price increases in Asia and Europe are less likely as carriers move cargo earlier than usual this year.”
The Lunar New Year begins on January 29, during which factories in Asia shut down for several weeks. The freight rate decline comes after shippers imported goods before the holiday and President Trump threatened to impose tariffs.
On his first day in office, Trump backed off his campaign call for global tariffs but announced that the U.S. would impose a 25% tariff on imports from Mexico and Canada until February 1.
“While this short time frame has been attributed by some observers to the International Emergency Economic Powers Act, the first U.S. trade policy memorandum issued by Trump immediately after taking office suggests a longer time frame. Long before these tariffs are ‘new,’” Levin wrote.
While tariffs are typically the result of a months-long process, “this week’s memorandum sets an April deadline for the required reports and recommendations, which may reduce the likelihood of a February 1 tariff increase.”
Levin said recent statements by Yemen’s Houthi rebels that they intend to cease attacks on most commercial shipping in the Red Sea following a ceasefire in the Gaza war are an encouraging sign, but it may be some time before shipping operators and shippers are confident that the Suez Canal route is safe for global shipping.
“Even if we assume that the Houthis surrender within the next six weeks, continued calm depends on Hamas and Israel agreeing to the terms of the second and third phases of the ceasefire,” the latest update said. Phase II negotiations are set to begin on February 5, but President Trump has said he has no confidence that subsequent phases of the ceasefire can be maintained because they are more difficult in many ways.
When traffic resumes on the Red Sea, Levin expects the adjustment period to last “a few weeks or longer” as traffic from Asia to Europe, the Mediterranean and North America shifts to shorter routes.
The Freightos Baltic Index showed freight rates between Asia and North Europe fell 17% to $4,694 per twenty-foot equivalent unit in the week ending January 17.
Rates in the Asia-Mediterranean region fell 7% to $5,283 per twenty-foot equivalent unit.
“Disruptions to schedules and vessel concentrations in Europe and Asia, as ships begin to arrive earlier, could lead to congestion and delays at those hubs, which could put upward pressure on prices in the short term.
Longer term, by 2024, capacity that doubled prices through Red Sea transshipment will return to the market, which will put “significant downward pressure” on prices.
Levin noted that some carriers believe that slower ship sailings in a seller’s market, idle ships, empty sailings and even increased demolitions could prevent prices from plunging.
“But potential oversupply could push deficit prices down to the end of 2023 levels, when transpacific prices would fall to $1,200 per unit of energy and Asia-Europe and transatlantic prices would fall to around $1,000 per unit of energy/energy equivalent unit”.