Rates have remained stable after rising 200% over the past year
The future direction of Ocean freight rates is at a crossroad; there are multiple directions it can go and we’ve identified indicators that will drive rates in either direction. Below, we will share this with you.
For the last five weeks, rates have remained stable after rising nearly 200% over the past year. Ocean carriers, such as ONE and Maersk have increased its EBITDA guidance by 14.2%. Maersk now anticipates a full year EBITDA of $7 to $8 Billion, up from earlier estimates of $6 to $7 Billion. ONE, Hapag-Lloyd and other carriers also are reporting similar results. All good news for carriers as successful financial performance by the carriers may stave off any near-term rate hikes. We predict that the carriers will maintain their positive financial trends as equipment shortages still exist with the increased demand. Golden Week records show a high level of ocean capacity as regulators put pressure on carriers to reduce the cancelled sailings. This has likely helped keep rates stable for the month and into the future.
China-US rates through October 2020 continue to show stability. Can this trend continue despite the higher rates below? Supply and demand should adjust and enable carriers to maintain the higher rates without any major rate fluctuations into 2021.
- China-US West Coast prices went unchanged at $3,844/FEU. This rate is 182% higher than the same time last year
- China-US East Coast prices were also stable at $4,664/FEU, and are 85% higher than rates for this week last year
All indications are that volumes will stay strong through November 2020 when peak season would normally fade. Although we believe rates will continue to remain as they are now in the near term (2021), industry experts have varying predictions as we navigate these treacherous waters. Outside influencers such as the world economy, USA politics, COVID-19 and future consumer demand in the coming months.
- Positive narrative indicates scheduled capacity, container leasing demand and production levels point to a busy December and even early 2021. E-commerce continues to drive demand as COVID-19 drives consumer demand away from the brick and mortar stores to internet shopping. All driving demand for the carriers
- Negative, signs of a US recession, the pandemic’s growing second wave, and the lack of additional government stimulus are all potential indications that the current boom can’t be sustained for much longer
Key insights that could allow stable ocean rates in the future.
- China-US ocean rates have now gone unchanged since mid-September, though prices are still extremely high. We may see some minimal rate increases in November even with capacity up 20% over last year point to strong demand through the end of the month at least.
- Rates from Southeast Asia to Amazon warehouses in the US, ocean rates remained steady for Amazon sellers, though air rates have increased 43% since the start of the month.
- Consumer tech product launches, eCommerce and holiday season products have shippers competing for space.
- October volumes to be only 1 percent behind last year. And though we expect a drop off starting in November possibly impacted by the delay of additional government stimulus.
- Increased capacity and steady volumes kept US-bound ocean rates relatively unchanged.
CPC has a proven track record of helping Shippers navigate these uncharted waters and enable optimization. As ocean rates move in either direction in the coming months and into 2021. By engaging CPC, we can tailor a program that meets short-term and long-term benefits. It all starts with a no-cost/ no-obligation assessment where CPC can identify the best solution. Contact CPC immediately if your company is ready to simplify and save.