The ‘Fall’ of Ocean Rates

The season of Fall has arrived, and perhaps global steamship lines took it not only as an indication of what leaves will do this season, but also as instruction for global ocean rates….

The National Retail Federation gave indications that the back-to-school shopping season this year could be much stronger than expected, potentially even surpassing pre-pandemic levels.  That proved to be false.  In Asia, orders have crumbled to near nothingness, as we quickly approach China’s Golden Week holiday, which will see al factories closing for the better part of a week or so (September 29th to October 6th).  It has become somewhat devastating to manufacturers throughout Asia who have had considerably less on the production books this year and high hopes that Fall in the United States could generate a true Peak Season coupled with increased need for manufacturing.  In reality, the demand for manufacturing has come in well under expectations and factories who hoped to take a shorter vacation for Golden Week are now extending closure dates with nothing much to do.

Steamship lines are suffering, too.  Spot rates have fallen now consistently since August and are approaching the lowest levels of the year we saw in mid-June.  There is no stopping in sight, as we enter the slowest period of shipping of the year.  Lines are beginning to put extensions of September rates in place through October 14th, though we will see many reductions put into place from now until October.  We will see no GRI (General Rate Increases), nor any PSS (Peak Season Surcharges) for the duration of 2023.  Importers can count on the costs to import being below current levels as we close out the year.

Lines have tried to combat falling rates with blank sailings as they often do.  There were decisions and objectives to maintain capacity control through blank sailings, but it seems they simply cannot blank enough vessels to harden the market in their favor.  Just last week, another 29 blank sailings were deployed moving capacity reductions from 3.7% to 14.1% on Asia-WC and from 2.2% to 16.1% on Asia-USEC, yet low volumes continue to drive a softer market.  We anticipate even more blank sailing deployments as October arrives.

The negative impact of blank sailings are now being felt across the coasts of The United States.  While rates are coming down, delays are on the rise.  Blank sailings mean vessel removal from service strings.  The result is cargo sits at ports, awaiting secondary vessels of later services to connect and assist on the continued journey to final destination.  Importers will see higher congestion and lower reliability on published services.  We will also see delays impacting arrival to final Ports of Discharge which occur at Ports of Loading as well as Transshipment points.  We encourage all importers to account for the potential of 7-14 day delays on arrival dates as carriers continue to strike vessels from planned sailings.

Thanks for reading.