China, US shipping rates continue to tumble as inflation cools consumer demand
- Spot rate for sending a 40-foot container from Asia to the West Coast of the US dropped by 3 per cent to US$8,934 this week
- Rates have been falling since early March despite expectations of pent-up volume being released following Shanghai’s reopening this month
Container shipping rates from China have continued to drop in recent weeks, despite expectations of pent-up volume being released following Shanghai’s reopening, as high inflation in the United States has suppressed consumer demand, analysts said.
The spot rate for sending a 40-foot container from Asia to the West Coast of the US, that includes the ports of Los Angeles and Long Beach, dropped by 3 per cent to US$8,934 this week, according to the Freightos Baltic Index.
The rate has been falling since early March when partial lockdowns in Shanghai started.
It has fallen 17 per cent so far in June, in contrast to a 11 per cent increase in the same month last year.
Meanwhile, the spot rate to the East Coast of the US, that includes the Port of New York and New Jersey, also dropped by 1 per cent to US$11,589 per 40-foot container this week.
“There were more signs this week of inventory surpluses [in the US] and a resulting slowing in orders by major retailers suggesting a decrease in demand – at least for certain goods – as consumers shift spending to services or to the inflated costs of necessities, or both,” said Judah Levine, head of research at Freightos.
Shanghai is home to the world’s largest port in terms of container throughput and is a major gateway for goods produced in nearby manufacturing hubs.
Even though the world’s major ocean carrier alliances have been removing shipping capacity and implementing more blank sailings by skipping a particular port or leg on a route in an attempt to maintain historical high freight rates, dwindling consumer demand has inevitably pushed down freight costs.
Consumer prices in the US have surged by 8.6 per cent in May from a year earlier, sending inflation to a new four-decade high as prices of everyday commodities have climbed.
“Major retailers like Walmart, Target and Amazon have indicated inventory overstocking, which could see them cutting down their imports to improve inventory turnaround times,” said a report from Shifl, a digital freight forwarding platform, on Thursday.
Ocean freight rates are intrinsically connected to the US retail industry as it makes up over half of all imports, Shifl said.
“Consumer retail expenditure seems to be at a tipping point, inevitably reducing total volumes getting ashore. We expect this to push prices further down in the future,” said Shifl CEO and founder Shabsie Levy.