Freight rates for containers shipped from Asia to the US are plummeting, with the 1 June general rate increases (GRIs) proving unsustainable.
Linerlytica reports that oversupply and soft demand have dragged down the market, especially on the Asia–US West Coast trade lane, which recorded its largest weekly loss.
Rates on the Shanghai Containerized Freight Index (SCFI) have reversed all gains from the past three weeks.
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US West Coast rates: ⬇ 20% week-on-week
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US East Coast rates: ⬇ 7.5% week-on-week
Carriers React to Changing Trade Dynamics
Carriers had previously reduced transpacific capacity in May due to US-China tariff tensions, but have since reinstated capacity after a new trade agreement. However, this move has worsened the oversupply issue.
The early end to the transpacific peak season has made matters worse, putting even contract peak season surcharges at risk.
Despite this, secondary trade lanes remain resilient thanks to strong cargo volumes, and charter rates remain stable due to limited available tonnage.
Impact on the Chemical Industry
While bulk chemicals are usually transported via tankers, the chemical industry still heavily relies on container ships to transport:
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Polymers like polyethylene (PE) and polypropylene (PP) in pellet form
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Liquid chemicals in isotanks
Thus, falling freight rates and volatile routes have a direct effect on logistics costs and supply chain stability in the sector.
Geopolitical Update: Strait of Hormuz Open, Red Sea Still Risky
Tensions in key global shipping chokepoints remain mixed:
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The Strait of Hormuz is fully open and operational, according to Vespucci Maritime president Lars Jensen, after a ceasefire between Iran and Israel.
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Meanwhile, the Red Sea and Suez Canal remain off-limits to many carriers due to Houthi rebel threats.
There are concerns the Houthis may resume attacks, especially on US ships, due to renewed hostilities involving the US and Iran.
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Source: ICIS
