SHIPPING: Tariffs push container rates from SE Asia, Vietnam above China-US rates

HOUSTON (ICIS)–Rates for shipping containers from southeast Asia and Vietnam have risen above rates from China to the US as tariffs – and a 90-day pause on reciprocal tariffs – are already shifting global trade patterns.

Peter Sand, chief analyst at ocean and freight rate analytics firm Xeneta, said he is now seeing the shifting global trade patterns caused by the tariffs play out in ocean freight rates.

“Falling demand out of China has coincided with shippers rushing imports out of Vietnam, which is subject to a 90-day pause on reciprocal tariffs,” Sand said. “Seeing the relationship between these two trades turn on its head is an early indication of the potential for tariffs to shift global trade on its axis.”

Sand, using Xeneta data, said importing into the US West Coast from China was more expensive than importing from Vietnam on 16 March. But by 25 April, Vietnam has become the more expensive of the two trades, as shown in the following chart.

In another example, the spread in rates between China and southeast Asia trades into US West Coast has widened from $7/FEU (40-foot equivalent unit) on 31 March to $181/FEU on 25 April (with southeast Asia the more expensive).

“As shippers stopped or slowed exports from China due to the tariffs, they have accelerated exports from southeast Asia countries, which has caused the spread in freight rates on these trades to widen,” Sand said.

AVERAGE GLOBAL RATES TICK LOWER
Average global container rates edged lower by 2% week on week, accord to supply chain advisors Drewry and as shown in the following chart.

Drewry expects rates to continue to decline in the coming week due to uncertainty stemming from reciprocal tariffs.

Blank sailings have surged again this week as carriers strive to maintain rates or at least stop the slide.

Alan Murphy, CEO of Sea-Intelligence, said the impact of the trade war has led shippers to pause, or outright cancel, shipments.

“This in turn reduces demand for capacity on container vessels, to which carriers respond by cancelling sailings,” Murphy said.

Murphy said this level of escalation in blanked capacity illustrates a dramatic change in the market.

“Partly from the perspective of the magnitude of the blank sailings, which are more akin to what we tend to see seasonally following Chinese New Year in January/February and Chinese Golden Week in October,” Murphy said.

Rates from online freight shipping marketplace and platform provider Freightos also fell over the week, with rates to both US coasts down by 5%.

Judah Levine, head of research at Freightos, said some vessels are leaving China only half full because of canceled orders.

Levine said some retailers have inventory from front-loading deliveries over the past few months and are taking a wait-and-see approach.

PORT CHARGES TARGETING CHINA-LINKED SHIPS
Levine said revised guidelines from the US Trade Representative (USTR) targeting China’s dominance in the maritime industry should not lead to the significant port call omissions and congestion that many feared would result from the original per port call proposal.

Market intelligence group Linerlytica said that although port fees on Chinese operated and Chinese-built ships are retained, carriers will be able to circumvent the fees by swapping out all of the affected ships in the next 180 days as the fee will no longer apply on the operators’ fleet composition or prospective orders but only on ships calling at US ports on a per voyage basis.

Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets. Titanium dioxide (TiO2) is also shipped in containers.

They also transport liquid chemicals in isotanks.

LIQUID TANKER RATES HOLD STEADY
US chemical tanker freight rates assessed by ICIS were steady this week with rates remaining unchanged from last week despite rates continuing to be pressured downward for several trade lanes.

There is downward pressure on rates along the USG-Asia trade lane as charterers are still in wait-and-see mode, and besides contract of affreightment (COA) cargoes there is very little seen in the market.

The tariffs and uncertainty continue to dampen the spot market, weighing on rates. The usual spot cargoes of methanol from Jose to China are the only ones reported, leaving methanol requirements from the region active to Asia.

Similarly, rates from the USG to ARA and all other trade lanes also held steady. The spot market to Europe gained momentum with a relatively good number of inquiries following the Easter holidays.  Despite the increased interest rates remain unchanged as the clean petroleum products (CPP) market continues to remain soft, leaving those vessels to participate in the chemical sector.

From the USG to Brazil, this trade lane had seen more inquiries, but there is plenty of available space for May lending downward pressure to spot rates and leaving most owners still trying to fill up prompt part space to both South American coasts for 1H May. Rates are soft and have lost some ground.

The USG to India route has seen an uptick in inquiries over the last week with no confirmed fixtures. Market talk of a trade deal between the US and India have sparked some interest leaving the rates flat for the time being and expected to remain unchanged in the near term.

With additional reporting by Kevin Callahan

Visit the US tariffs, policy – impact on chemicals and energy topic page

Visit the Logistics: Impact on chemicals and energy topic page