Pacific shift from China to SE Asia, Korea
Trade tariffs cause rate differential and capacity transfer to countries “other than China”
There is no consensus on who will “win” the US-China trade war, or whether there will be a winner at all, but the shipping industry has already reacted and re-priced its services to reflect to the new trade realities.
Based on rate data from the Drewry Forwarder Benchmarking Club, a user group which enables forwarders and NVOCCs to track and compare the prices at which they buy capacity from ocean carriers, a gap has already opened since March between declining freight rates ex China and broadly stable or increasing rates from South Korea and from Singapore.
The China export boom has stopped, for now, and US importers have shifted some of their sourcing from China to tariff-free South East Asia.
As China still accounts for the majority of transpacific cargoes, its freight rates are currently a reference benchmark for the entire trade. It could be that this situation will be replaced in the future by a situation of different regional freight rates.
The decline in rates ex China happened despite a reduction in the number of weekly transpacific loops from China to both the East and West coasts of North America.
Drewry compared the number of transpacific loops between May 2018 and May 2019 and confirms that carriers have removed loops from Shanghai to North America (3 fewer loops to the West Coast and 1 fewer to the East Coast). There have also been some service cuts from South Korea and from Vietnam, but on a much smaller scale (see chart). Still, the number of loops from Shanghai exceeds by far the number of loops from Singapore or Vietnam.
Could this be the beginning of a larger shift in ship capacity if the trade war escalates and becomes a long-term situation?
Watch this space.