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CONTAINERS QUARTERLY: Rush of US imported goods expected but container rates may have peaked

Highlights

Cargo flows from Asia smooth out but US port congestion intensifies

Trans-Pacific container rates extend their plateau into Q4

US container ports are expected to face more congestion in the final push to get goods into the country for the holiday shopping season, but rates may have limited upside in the fourth quarter as cargo flows from Asia improve.

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The queue of ships waiting to berth at the Los Angeles-Long Beach port complex rebounded to 65 ships on Oct. 12 from a trough of 46 ships during China's Oct. 1-8 Golden Week holiday break, according to S&P Global Platts cFlow trade-flow analytics software.

Congestion is also rising at other US ports. There were around 40 ships at anchor waiting to berth at major North American ports on Oct. 12 including 21 ships in the queue at Savannah on the US East Coast.

The Port of Los Angeles said it expects to handle 142,136 twenty-foot equivalent units this week, up 81.6% from Golden Week, before volumes jump again to 171,392 TEUs the week of Oct. 17-23.

"This vessel imbalance is the key to the problems we face today," said shipping consultant Jon Monroe. "The uncoordinated schedules of vessels among the various carriers, adding vessels here and there, or taking vessels out of rotation, is a big part of the problem."

Chinese exporters catch-up on cargo loading

Golden Week allowed the largest ports in East China to reduce their own vessel queues and load more export cargoes. The queue of ships waiting at anchor in the Shanghai Region Queue dropped to 38 ships on Oct. 12 from 61 ships on Oct. 1, while the line-up at the Ningbo-Zhoushan Anchorage eased to 40 ships from 44 over the same period.

Energy shortages in China have led to the rationing power for manufacturing, but the slowdown in production is not expected to cause exports to fall sharply in the short term as there is still a long backlog of cargoes waiting to be shipped ahead of the year-end holidays.

"Factory closures may be a bit overstated," Monroe said. "Factories in South China will be open three-to-four days a week in the coming weeks. Central and North China factories are expected fare better with factories open four-to-five days a week."

China's manufacturing PMI slipped into contraction in September with a reading of 49.6. It was the first time Chinese factory output contracted since the first major coronavirus pandemic disruption in February 2020, which could eventually have an impact on trans-Pacific demand for container freight if the power shortages are not resolved.

"We'll have to see what kind of impact all this has on demand and how carriers react with their rate decisions," a US-based freight forwarder said. "We have already seen some reductions in premium rates, but FAK rates look likely to hold for the time being."

Trans-Pacific container rates plateau

All-inclusive premium rates from North Asia to West Coast North America briefly sank to around the $13,000/FEU as pre-payment discounts were offered at the start of Golden Week on Oct. 1 but were already back up to previous levels around $15,000/FEU by Oct. 8.

Platts Container Rate 13 for the same route was assessed at $8,950/FEU on Oct. 11, down slightly by $50/FEU from its all-time high of $9,000/FEU on Oct. 6.

"Rates look like they are leveling out possibly through the January-March period, with another bout of restocking to come ahead of Lunar New Year," A US importer said. "By early in the second quarter next year is when we could start to see some easing."

The National Retail Federation reported that US retail import volumes likely peaked in August at 2.27 million TEUs but might have continued growing if not for port congestion and a build-up of empty containers at US terminals. The NRF estimated that US import volumes dipped to around 2.25 million TEUs in September and will continue to steadily decline to 2.1 million TEUs by December.