Trans-Pacific container rates facing Q4 headwinds despite hitting record highs

Houston — The trans-Pacific container market is bracing for uncertain conditions after China's Golden Week holiday in October despite freight rates hitting new all-time highs in August.

Current shortages of carrying capacity have the potential to push trans-Pacific container rates higher as shipowners seek to implement further General Rate Increases at the start of September.

But China's holiday week and a possible resurgence in pandemic-related lockdowns in the fourth quarter could sharply curtail Asian containerized exports and bring rates lower.

"After Golden Week is a quiet time," shipping firm Hapag-Lloyd AG North America President Uffe Ostergaard said on the sidelines of the US Soy Global Trade Exchange conference on Aug. 26. "Rates will sustain themselves above the March-April contract level," he added.

Throughout March and April, Platts Container Rate 13 – North Asia to West Coast North America – averaged around $1,480/forty-foot equivalent unit, or FEU. This assessment hit $3,450/FEU on Aug.17, the highest since Platts began assessing in 2017 and was up by 138% ($2,000/FEU) compared with Aug. 16, 2019.

Ostergaard said that Hapag-Lloyd is focusing on how demand will respond to an uncertain market during the fourth quarter.

"In the fourth quarter and even into 2021, we can expect another pick up in canceled sails depending on US consumer demand," he said at the conference.

Asia equipment issues

Logistic issues continue to dog the ports in North Asia, with rolling stock still causing some logistical headaches for carriers struggling to get cargo out of the ports despite full operations currently underway and a dearth of void sailings in the market.

This looks likely to change however, with void sailings expected to return in the fourth quarter as demand begins to tail off somewhat as the market reaches the end of the year.

"Everyone wants to fill their warehouses before Golden Week and the seemingly inevitable lockdowns that we will have at the end of the year," said a trans-Pacific carrier source.