SHIPPING: Asia-US container rates will rise, but not explode, on tariff pause – analysts

HOUSTON (ICIS)–Freight rates from China to the US are likely to rise in the near term now that a 90-day pause on extreme tariffs has been negotiated, but in the longer term, it is likely rates will continue the downward trend seen prior to the “Liberation Day” announcement, according to shipping industry analysts.

Peter Sand, chief analyst at ocean and freight rate analytics firm Xeneta, said politicians on all sides will argue over who has won, who has lost and who has the better deal, but the most important point is that we will now see goods flowing more easily between the world’s biggest trading nations.

“The spiraling trade war was catastrophic for businesses, so there will be huge relief that diplomacy appears to be returning,” Sand said.

Judah Levine, head of research at online freight shipping marketplace and platform provider Freightos, said rates will rise, but not explode.

“The volume rebound will probably signal the start of an early peak season that will keep rates elevated – but we might not see last year’s $8,000+/FEU highs due to a more competitive, well-supplied carrier landscape already keeping rates lower year on year,” Levine said.

Levine said he expects tighter capacity as carriers work to reposition vessels and reduce the number of blank sailings that were used to support rates during the height of the tariff war.

Sand agreed, noting that carriers responded to falling volumes from China to the US by slashing container shipping capacity and redeploying it onto other trades, such as the Asia to Europe route.

“It takes time to shift capacity back again, so a revival in volumes from China to US may mean shippers have to pay a little over the odds in the short term,” Sand said.

Lars Jensen, president of consultant Vespucci Maritime, said to expect an immediate surge of cargo from China to the US, based on two reasons: first, there is already a large amount of cargo ready to go, as US importers have been adopting a “wait-and-see” strategy over the past month and abstained from shipping cargo which is already ready.

Second, the 90-day pause expires in the middle of the usual peak season for holiday-related goods going to the US.

“We should therefore expect a possible pull-forward of cargo creating a shorter, sharper, peak season from basically right now,” Jensen said.

US ports were already beginning to see fewer vessels arriving or scheduling arrivals because of the trade war, but Jensen said the 90-day pause could lead to a swift change.

“With the expected surge in cargo, we should also expect that the US ports which are right now facing a massive drop in cargo volume will switch to face a surge of cargo with a substantial risk of bottleneck issues and delays as a consequence,” Jensen said.

Average spot rates are down by 56% and 48% from China to the US West Coast and US East Coast, respectively, since 1 January, despite an uptick of 18% and 12% on 1 April, according to Xeneta data.

Rates have fallen slightly since then but remain elevated compared with the end of March.

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), which are shipped in pellets.

They also transport liquid chemicals in isotanks.

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