- Southeast Asia Sees 20% Increase in US Freight Demand.
- Southeast Asia Faces Potential Congestion and Equipment Shortages.
- China-US Air Cargo Rates Stable, But De Minimis Suspension Looms.
Since 145% tariffs came into effect earlier this month, bookings in containers between the US and China declined by 30% to 60%. Carriers have reacted by blanking sailings aggressively and cancelling services to avoid a downturn in ocean freight rates. So far, this tactic has succeeded in stabilising transpacific container market prices, reports AJOT.
Southeast Asia Sees Surge in Bookings Amid Tariff Pause
Conversely, freight demand has been growing out of Southeast Asia, with some forwarders seeing a 20% jump in bookings. This is primarily because the US suspended tariffs on these nations until July, which led US importers to frontload shipments before the deadline.
Diverging Rate Trends: China vs Southeast Asia
Freightos Terminal statistics demonstrate a clear separation in rate direction following the April 9 tariff implementation. China-origin rates as well as Vietnam’s Saigon Port rates were up by 40% ahead of the tariffs, but afterwards:
- China-origin rates dropped over 30%.
- Vietnam rates have been maintained at high levels.
This trend is a sign of the ongoing lull in bilateral tariffs for Southeast Asia, which is supporting ongoing demand and pricing from the region, while Chinese rates have eased.
Risk of Congestion and Equipment Shortages in Southeast Asia
If the Southeast Asian demand persists, it could eventually cause clogs at primary container ports as well as slowing down shipments. There may be equipment shortages, especially if there is a big surge in the demand for empties as countries move more volume to the US.
Air Cargo Rates Remain Stable, But De Minimis Suspension Looms
The China–US air freight market has been untouched to a great extent up until now thanks to exemptions from tariffs for electronics and the de minimis exemption on e-commerce exports. Consequently, air freight rates have continued to be high at $5.58/kg. Nevertheless, the May 2 de minimis exemption suspension will lead to a sudden drop in China–US air freight volumes and prices.
Freightos Index Rates
The most recent Freightos Baltic Index reports some changes in ocean rates, with Asia–US West Coast prices decreasing 1% to $2,328/FEU and Asia–US East Coast rates down 2% to $3,395/FEU. Asia–Mediterranean rates, on the other hand, have risen 5% to $3,082/FEU. In airfreight, China–North America prices rose by 1% to $5.58/kg, while China–North Europe rates decreased 1% to $3.71/kg.
Tariffs Cause US Importers to Cancel or Postpone Shipments
Most US importers are suspending orders and halting shipments because of the high 145% tariffs and expect that tariff cuts will be coming their way following future negotiations between the two nations. Importers are drawing on current inventory surpluses to suspend China-origin shipments, and unless the tariffs get cut soon, US consumers would eventually experience inventory shortfalls on some merchandise as well as higher retail prices, especially for China-manufactured items such as toys, baby items, and sports goods.
Carriers Adjust to Demand Decline by Cutting Capacity
To counter the drop in China–US freight demand, carriers are blanking 28% of trans-Pacific capacity to the West Coast and 42% to the East Coast. Even with these cuts, the capacity reductions might not be sufficient to equal the overall demand decline, as volume from Southeast Asia is mitigating the decline in China-origin shipments. If Southeast Asian demand keeps growing strongly, it will result in congestion and delays at US ports.
Potential Capacity Shifts and Implications
Carriers may redirect some of the blanked China-US capacity to Southeast Asia-US routes to absorb the surge in demand. This could, however, precipitate port congestion, delay, and possible equipment shortage, especially when empty containers become inadequate as a result of the change in trade flows.
China vs SEA: Port-Pair Rate Analysis
A comparison of port-pair prices shows a contrasting picture between Southeast Asia-origin and China-origin prices. From April 2 through April 9, rates to Long Beach out of Shanghai and Saigon climbed more than 40%. Post-tariff imposition, though, Shanghai–Long Beach rates declined by more than 30%, while rates from Saigon to Long Beach stayed high. This again highlights the varied effects of the tariff hiatus on Southeast Asia and persistent tariff pressures affecting China.
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Source: AJOT
