Home > 2022 > Trans Pacific Eastbound Rates Drop below US$5,000

Trans Pacific Eastbound Rates Drop below US$5,000

Trans Pacific Eastbound Rates Drop below US$5,000

The WTO identified that trade flows slowed last quarter and will likely stay weak in the second half, which is consistent with the WTO’s forecast for three per cent growth in 2022, reports London’s Drewry Shipping Consultants.

The Geneva-based WTO sounded less confident about that prediction given that the war in Ukraine is dragging on, inflationary pressures abound and interest rates are rising, said the reports.

The good news is some supply strains are easing and fuel prices are falling – removing some of the sting that logistics costs have contributed to corporate balance sheets but it also means the surprise star of pandemic-driven profitability is fading.

Citi also cut its outlook for Maersk, Hapag-Lloyd and Zim on expectations of a deeper slowdown in global demand, citing a few reasons: a reduction in consumption, flagging US home sales and rising inflation. They’re all negative omens for an industry that moves 80 per cent of global trade, said the report.

“Now the carriers that just a few months ago had zero available capacity have ample room on the ships they deploy across key trade lanes – a reversal that has sent short-term container rates sinking for six straight months,” the report said.

Drewry said the spot rate for the benchmark TPEB (trans pacific eastbound) lane fell to US$4,949 per FEU, marking the first time the index has slipped below $5,000 since December 2020. London’s Clarksons Research expects container trade capacity will outpace demand by 300 basis points in 2022, which may further reduce container rates.

Bloomberg expects container spot rates will keep moderating but stay “well above” their pre-pandemic levels through the rest of 2022 because of the ongoing fragility of the world’s supply chains.

Looking for someone to blame for inflation, European bureaucrats are also mulling the breakup of the 2M vessel-sharing alliance between Maersk and MSC, says a Citi note.

“EU regulation allows liners to cooperate and offer joint services provided the combined market share is less than 30 per cent,” Citi said. “We expect 2M alliances’ market share to increase from 27 per cent in 2021 to 33 per cent by 2025.”

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