US shipping rates have been dropping rapidly in recent weeks, particularly on the West Coast.
Reports indicate that some prices in freight market have fallen below $2,000 per container, while major shipping companies are offering rates around $2,400-$2,500. On the East Coast, FAK (freight-all-kinds) rates are fluctuating between $4,600 and $4,800. These prices are valid until December 14th.
The decline in rates is largely attributed to a seasonal slowdown in demand, as the holiday rush has passed and shipments for next year have yet to begin. However, several factors are contributing to the steeper-than-usual decline this year.
Firstly, imports from Asia in November grew by 11.6% year-on-year, exceeding expectations and indicating a less-than-typical off season. This growth is partly attributed to concerns over potential tariff increases under a re-elected President Trump, prompting some importers to expedite shipments.
Secondly, labor negotiations on the East Coast remain stalled, raising the possibility of a second strike in January 2024. This has led some shippers to reroute cargo to the West Coast, further boosting demand and temporarily propping up prices.
However, despite the short-term boost, long-term trends suggest continued pressure on West Coast shipping rates. The ongoing “decoupling” from China has resulted in slower growth in Chinese exports compared to the rest of Asia, indicating a shift in sourcing patterns.
Additionally, shipping companies have not implemented widespread blank sailings or capacity reductions, as they remain optimistic about fourth-quarter cargo volumes. This optimism stems from the potential for a “pre-tariff” surge in imports, should President Trump follow through on his proposed tariff increases.
While the immediate future remains uncertain, the traditional fourth-quarter slowdown and the lack of external stimuli suggest that West Coast shipping rates are likely to remain under pressure in the following month till 2025.