- Spot rates between Shanghai and Los Angeles dropped 30% since the beginning of the year by the end of the first quarter, according to Drewry's World Container Index, as volume from Asia to the West Coast North America (WCNA) is similarly declining.
- Imports from Asia to the WCNA have dropped 3% year-over-year after this route saw record-breaking numbers at the tail-end of 2018 as shippers rushed to beat tariffs, Drewry said in a recent analysis.
- "There was always likely to be a hangover from the tariff-induced cargo rush of late-2018, but the sting on Asia-West Coast North America looks to be more severe than carriers expected," Drewry reported."This misjudgment looks set to keep annual contract increases in check." While carriers may feel this sting, shippers could benefit from the resulting rates.
Shippers are going through annual contract renewals with a new rate period beginning May 1. One remaining discussion in these renewals is the addition of fuel surcharges to allow carriers to recoup their costs when they have to start paying for low-sulfur fuel oil ahead of IMO 2020.
Overall, carriers don't expect large increases in contract rates, so things are looking up for shippers. "Earlier in the year, it seemed the carriers might be able to secure some modest increase in revenue from their BCO contracts, but those hopes now seem dashed," Drewry said.
As trade is slowing, this year it will be difficult for the Asia-WCNA route to get close to the 6% growth rate it saw in 2018 on the back of tariffs. The continued uncertainty surrounding the U.S. and China trade deal makes it hard to predict, though.
Port of Long Beach Executive Director Mario Cordero said the port still expects growth this year, but it will be "modest" compared to last year.
"With warehouses full from shippers rushing to beat the looming threat of escalating tariffs, shipments slowed somewhat," Cordero said in a statement. "It’s going to take some time for inventory to cycle to markets and for typical growth to resume."
Spot rates typically respond to the market and fall when demand lowers. If shippers continue to slow their imports, spot rates will likely follow suit.