Rates for shipping containers from east Asia and China to the US were mostly softer as the frontloading of imports to beat new tariffs is slowing, while liquid tanker rates were flat to lower.
CONTAINER RATES
Rates from shipping firms tracked by ICIS were mostly lower this week with increases from the New York Shipping Exchange Freight Index (NYFI) and from online shipping marketplace and platform provider Freightos, where rates to the West Coast are around $7,500/FEU (40-foot equivalent unit) and rates to the East Coast topped $9,000/FEU.
Judah Levine, head of research at Freightos, said increases indicate that the early peak season rush is ongoing.
“The National Retail Federation’s (NRF’s) latest US ocean import report estimates July arrivals will reach 2.47 million TEU (20-foot equivalent units), breaking the record for monthly volumes set during the pandemic, and confirming the demand-driven rush that pushed container prices up in June,” Levine said.
Levine said carriers have additional, mid-month increases of as much as $1,000/FEU planned for this week, but there are some indications that peak season demand that started early may already be easing earlier than usual too.
“Alongside reports that space is beginning to open up and some carriers are offering discounts, the NRF projects August arrivals to drop 10% month on month, with September volumes falling by 10% as well,” Levine said.
Levine said that rate behavior in the coming days should indicate if the demand peak has passed, though congestion could keep rates elevated for a while even if the peak in new bookings is behind us.
Rates from supply chain advisors Drewry edged lower to both coasts but anticipates steady rates in the near term.
“With the rush for front-loading ahead of the US tariff deadline easing, carriers’ proactive capacity management should prevent spot freight rates from falling significantly,” Drewry said.
Rates from ocean and freight rates and analytics firm Xeneta also ticked lower, driven by carriers continuing to ramp up offered capacity across the main fronthaul trades and the frontloading demand that fueled the spike beginning to ease.
Emily Stausboll, senior shipping analyst at Xeneta, said shippers pulled forward volumes at the start of peak season to avoid expected Q3 bunker adjustment factor increases and protect supply chains from the Middle East disruption rippling across global trades.
“The irony is this frontloading contributed to a capacity squeeze that then pushed spot rates higher than they likely would have been otherwise,” Stausboll said. “Shippers will understandably take action to protect supply chains in the face of threats such as the closure of the Strait of Hormuz, but this can make the situation worse.”
Stausboll said the frontloading means peak season effectively started in May this year rather than July, and logically, will also be over sooner in the absence of underlying growth in container shipping demand.
“This, combined with increasing offered capacity, is perhaps why we are starting to see a softening in rates,” Stausboll said. “Shippers who had to move goods to protect supply chains have done so. Those with the luxury of waiting may now hold off in the hope that rates come down further.”
Rates on the NYFI rose by 2.3% to the West Coast and by 4.0% to the East Coast while rates on the Shanghai Containerized Freight Index (SCFI), which tracks rates for containers leaving Shanghai, fell by 3.28% – down for the second week after rising for each of the previous 10 weeks.
Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), which are shipped in pellets. Titanium dioxide (TiO2) is also shipped in containers.
They also transport liquid chemicals in isotanks.
TANKER RATES
US chemical tanker freight rates as assessed by ICIS were overall steady to lower this week for parcels from the US Gulf (USG) to the main trade routes.
There continues to be downward pressure along the USG to Asia trade lane as the spot market has been relatively quiet over the last week. Additionally, COA (contract of affreightment) volumes are heard to be lower than anticipated as well. As a result, this has put rates under downward pressure, softening them even further given the few inquiries seen in the market and as MEG seems to be the most prevalent cargo quoted.
Similarly, rates from the USG to Rotterdam were steady this week. However, overall activity in the European trade lane appears to be slowing down, putting the rates under downward pressure. Although, the usual cargoes of methyl tertiary butyl ether (MTBE), styrene, and ethanol were reportedly fixed for end of July departures.
Freight rates are now expected to remain steady for the time being along this route although CPP experienced unusually lower freight rates which may make it attractive to enter the chemical space, adding to the existing availability of tonnage.
There was no difference between the USG to South America route, but weaker demand and a well-supplied position list could see the freight rates pressured further lower. The renewed threats of tariffs between the US and Brazil could severely impact this trade lane if they in fact take place.
Overall, the market was relatively stable with softer COA nominations putting downward pressure on rates as more space has become available for the balance of July.
On the bunker side, fuel prices have remained volatile, on the back of the ever-changing energy prices, as a result week by week were significantly higher.
Source: By Adam Yanelli, Additional reporting by Kevin Callahan
