Industry Pulse: Ocean carriers struggle to break even as rates fall
- Ocean freight rates continued their downward spiral in April, according to data from the Freightos International Freight Index (FIFI).
- Rates on routes from China to U.S. West Coast ports dropped 3.49% from March to April. On routes to the East Coast, rates fell 7.78%.
- April rates in 2018 were significantly lower than in 2017. They dropped 23.93% YoY on China to West Coast routes, and 18.77% for the East Coast.
While the drop in ocean freight rates in April was not nearly as dramatic as the drop in March, rates certainly didn't turn up or surge as they did at the beginning of the year.
The news may be music to shipper's ears, but it indicates carriers are struggling. According to The Wall Street Journal, rates on Asia-West Coast routes are well below the cost needed for carriers to break even. Typically consolidation and decreased competition in the industry would raise rates, but ONE's launch hasn't delivered that expected impact yet.
In addition to rate decreases, container import volumes fell on West Coast ports. The dip appears to be a continuation of decline after the Chinese New Year, which bumped both volumes and rates artificially high.
"We’re comparing our numbers to an extraordinary 29-percent volume gain last March so a decline is not unexpected," Port of Los Angeles Executive Director Gene Seroka said in a press release.
While overall volumes may be down, demand for cold chain services is high. Over the past five years, demand for reefers has increased 5-6% each year, while regular container demand has grown around half that rate. The Port of Oakland has seen so much growth in perishable shipments that it plans to open a "Cool Port" this summer.
- Supply Chain Dive Ocean freight rates plummet post Chinese New Year
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