Shipping to the West Coast is not so cheap anymore
- Peak season 2018 broke a new threshold in terms of ocean freight spot rates: It is now as expensive to transport a product from China to North America's West Coast as it was to ship to the East Coast during last year's peak season.
- Spot rates for the West Coast trade lane soared to a weekly average of more than $2,000 per TEU in August 2018, and have yet to let down. By October, the average reached $2,413 per TEU — a 74% increase from last year's costs.
- By contrast, it cost shippers a weekly average of $2,342 to ship a TEU from China to the East Coast during October 2017. Those rates, however, have also risen dramatically. It now costs an average of $3,393 to ship on that trade lane, a cost 45% higher than what was faced last year.
It is still cheaper to ship to the West Coast than the East Coast, but by no means is it cheap.
The above chart shows a meteoric rise in rates on both trade lanes since April 2018, making this year one of the more expensive peak shipping seasons to date. Only shipping to the East Coast during January and February — in the midst of Chinese New Year — has been more expensive in the past.
The question is: Will the rising costs ever let down?
Rates depend on a number of factors, such as crude oil costs, available capacity and demand levels. This year, however, all of those factors appear to have converged to deliver an expensive season. Crude oil costs reached $75 per barrel in September, import volumes continue to surge at ports, and carriers are still adjusting their freight networks (albeit on a global scale).
If the situation continues, shippers can expect 2019 to be another year of high freight costs — especially as the ocean shipping industry transitions to lower-emission fuel, which is expected to add another surcharge to rates.
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