Key insights:

1 Ocean rates out Asia eased last week across the major lanes. For volumes to N. Europe and Mediterranean, Red Sea diversions mean the window to ship and receive goods before the holiday season is closing, likely leading to decreasing demand and rates that are 10% and 19% lower than their July peaks, respectively.

2 Demand that is likely past its peak for the year, as well as increases in capacity have prices to the US West Coast 15% lower than in July. But a shift of volumes from the East Coast in anticipation of a possible port worker strike in October is keeping West Coast logistics busy nonetheless, with some carriers even adding sailings in the coming weeks.

3 Improving ocean logistics conditions out of India’s west coast faces new challenges from last week’s floods, leading to new backlogs in Mundra.

4 Port congestion is still above normal levels at some East Asian hubs. But better distribution of transhipment volumes that caused severe congestion back in May is one factor leading to more manageable wait times.

5 Cross-border e-commerce volumes continue to be a major driver of air cargo demand and elevated rates. Prices out of China were $5.12/kg to N. America last week and $3.61/kg to Europe.

Ocean rates - Freightos Baltic Index:

• Asia-US West Coast prices (FBX01 Weekly) fell 4% to $6,858/FEU.

• Asia-US East Coast prices (FBX03 Weekly) fell 3% to $9,409/FEU.

• Asia-N. Europe prices (FBX11 Weekly) fell 2% to $7,770/FEU.

• Asia-Mediterranean prices (FBX13 Weekly) fell 12% to $6,274/FEU.

Air rates - Freightos Air index

• China - N. America weekly prices decreased 16% to $5.12/kg

• China - N. Europe weekly prices increased 5% to $3.61/kg.

• N. Europe - N. America weekly stayed level at $1.66/kg.

Analysis

Ocean rates out Asia eased slightly last week across the major lanes.

For shipments to N. Europe and the Mediterranean the arrival window for this year’s peak season goods – taking into account longer transit times around the south of Africa and the upcoming Golden Week slow down in China – is closing, removing some demand side pressure on rates. Prices to N. Europe remain five times higher than in 2019 nonetheless, but relative to their July peaks rates have now decreased 10% to N. Europe and 19% to the Mediterranean.

On the transpacific, the arrival window is about closed for goods to the East Coast and Gulf before a possible port worker strike on October 1st, which may be reflected in last week’s slight rate decline to the East Coast though prices are still just 2% below their July peak.

The looming strike may be pushing more volumes to the West Coast, supporting some rate rebound since mid-August, but prices are nonetheless 15% below their high for the year reached in mid-July. Some of this rate decline is likely also due to capacity increases, including from opportunistic carriers who launched transpacific services when rates were spiking earlier in the summer.

There are reports of a recent increase in competition for transpacific customers with some of these smaller carriers already offering discounted rates as a result. If this is an indication of excess capacity on this lane and the larger carriers are forced to follow suit, we could expect rates overall to decrease as well.

At the same time, there are also indications – including increases in rail dwell times at some Long Beach terminals – that demand remains strong to the West Coast. Some carriers are actually scheduling extra sailings for the next two months, though this move may be more in anticipation of a growing shift away from the East Coast than an indication of peak season demand stretching into October.

Easing demand and capacity increases had been leading to smoother operations out of India’s west coast ports, but flooding caused by severe storms last week are once again leading to backlogs at the Port of Mundra.

Congestion is still above normal levels at some East Asian hubs. But the better distribution of transhipment containers across more ports compared to back in May when these volumes overwhelmed places like Singapore and Colombo is one factor leading to more manageable wait times at these ports and at those downstream in China.

Cross-border e-commerce volumes continue to be a major driver of air cargo demand, and the industry is continuing to adjust to this new reality. This demand growth – even in what are typically slow months for the market – are keeping rates up as well. Freightos Air Index benchmark rates out of China were $5.12/kg to N. America last week and $3.61/kg to Europe.