In July, the Asia US spot container freight index rose by two digits, and shipping companies seem to have finally made some progress in controlling ship capacity in Sino US trade.

According to data from several index providers, spot freight rates have risen for three consecutive weeks, rebounding to levels at the beginning of 2023 and the end of 2022. The volume of US import bookings is still higher than the level before the COVID-19 epidemic, and many analysts now emphasize the positive impact of the reduction of ship capacity.

Shipping companies reduce cross Pacific capacity

Normally, higher demand leads to higher capacity, but in the past month, as demand improves, shipping companies have been focusing on tightening capacity, "said Omar Nokta, a shipping analyst at investment bank Jefferies on Monday

Analysis and price reporting agency Platts cited multiple market participants who saw the effectiveness of shipping companies controlling capacity, including limited capacity forcing shippers to book in advance and expectations of a sustained increase in spot prices in August.

A logistics source stated that the transportation capacity of Asia West Coast has decreased by 15% compared to June this month, while the transportation capacity of Asia East Coast has decreased by 8% to 10%, including the impact of restrictions on the Panama Canal.

Consulting firm Drewry attributes the increase in spot freight rates across the Pacific to "reduced capacity due to increased blank flights," "the impact of strikes by Canadian port workers," and "a more optimistic outlook for North American freight demand.

Another analysis company, Linerlytica, believes that due to capacity issues, there have been different trends in the Trans Pacific and Eurasian regions, with freight rates increasing in the Trans Pacific region while freight rates in the Eurasian region are still decreasing.

Many of the new ships delivered this year are 24000 TEU equivalent ships designed for Asia Europe services, which has brought supply pressure to the industry.

Linerlytica stated that so far, capacity deployment across the Pacific has decreased by 12.1%, while capacity in the Asia Europe region has increased by 7.6%

On Monday, Linerlytica said, "The industry is becoming increasingly optimistic about raising shipping costs on August 1st, especially on highly utilized cross Pacific routes

It is reported that spot freight across the Pacific region is still at a loss level. However, according to most spot indexes, freight is approaching the break even point, which is higher or close to the level before the COVID-19 epidemic.

Different indices use different data sources and methods, resulting in different ratio numbers. However, in the past three weeks, they have all been moving in the same upward direction.

Platts assessed on Monday that spot shipping costs for North Asia West Coast are $1700 per FEU, a 31% increase on a weekly basis, reaching the highest level since October. Platts has set the shipping cost for North Asia North America East Coast at $2600 per FEU, a 13% increase on a weekly basis, reaching the highest level since early February.

Xeneta, which tracks both short-term and long-term shipping costs, set the average short-term shipping cost for the Far East West Coast of the United States at $1715 per FEU on Monday, the highest level since late November and a 33% increase from June 29th.

Xeneta estimates that the average short-term shipping cost for the Far East Coast is $2339 per FEU, the highest level since February and a 6% increase from the end of June.

According to Drewry World Container Index (WCI) data, the average spot freight on the Shanghai Los Angeles route was $1965 per FEU in the week ending last Thursday, a 29% increase from the last week of June. Compared with that before the COVID-19, the WCI rate of this route is 20% higher than that of the same period in 2018 and 24% higher than that of 2019.

As of last Thursday, the WCI Shanghai New York assessment rose to $2906 per FEU, up 16% from the last week of June, 9% from the same week in 2018, and 3% from 2019.

The Freightos Baltic Daily Index (FBX) depicts a somewhat different picture, emphasizing how different providers generate different numbers.

The FBX China West Coast Index, like other indices, has risen by 20% since June 30th, but last Friday it was $1438 per FEU, much lower than other assessments.

Last Friday's FBX China West Coast freight assessment was 11% lower than the same period in 2018 and 5% lower than in 2019.

Last Friday, FBX China East Coast assessed $2604 per FEU, an increase of 19% from the end of June, but a decrease of 14% from the same period in 2019 and 3% from 2018.

US import bookings remain optimistic

In the first half of 2023, the import volume of the United States increased by a single digit compared to before the pandemic. The latest booking data from Container Atlas indicates that US imports should maintain a healthy level from August to the first half of September.

This data covers a portion of the overall booking (rather than loading) and is based on the scheduled departure date. The number of bookings scheduled to depart from all overseas ports on Monday increased by 25% from the recent low set on May 8, and by 8% from the same period in 2019 (before the COVID-19 epidemic).

If the import volume of the United States remains stable or increases in August, and shipping companies reduce cross Pacific capacity through blank flights, then spot freight rates may continue to develop towards profitability.