The latest information coming from freight forwarders and experts in logistics points towards the expectation that US imports will remain high throughout October 2020. Such trends are fueled by a rise in e-Commerce fulfillment frameworks as well as the ongoing transactions involving personal protective equipment (PPE) which is mainly due to the onset of the COVID-19 pandemic.
Information from Non-vessel operating common carriers (NVOs) shows that there is a continued increase in imports which are likely to raise already record-breaking spot rates. This is particularly true of the eastbound trans-Pacific route. For example, by the 28th of August 2020; the Asia-US West Coast rate was $3,639. This represents an increase of 5.8% the previous week’s record high and a 125.3% increase from the same week in the previous year. Similarly, the rate from China to the US East Coast was $4,207 per FEU which represents a 6.4% increment from the previous week and a 56.3% increment for the same week in the previous year.
How Shipping Patterns Are Changing and the Role of E-Commerce
At the beginning of August 2020, NVOs were predicting an import surge that would take us through September. Currently, they are predicting an even longer surge based on the statistics relating to e-Commerce fulfillment which has experienced unprecedented growth due to the COVID-19 crisis. Many customers prefer to transact online than in person, a sentiment that was echoed by Jon Monroe, a consultant to NVOs. PPE shipments, which contributed to the surge in July, remain strong due to large-volume purchases by federal and state governments.
Consumers are also contributing to the surge by shopping online for a broad range of merchandise. The COVID-19 crisis has brought to the fore, some of the weaknesses of in-store shopping, and that has meant a boom for shipping. According to some analysts, this is part of a wider trend that could overhaul the timing of peak season shipping, particularly as it relates to the eastbound trans-Pacific routes.
A transportation consultant has already noted that the “entire Black Friday shopping scene” is going to change significantly. Some big-box retailers are still replenishing inventory that was used up following the first easing of lockdown measures in the USA following the first wave of COVID-19 infections. However, those retailers are taking both e-Commerce fulfillment and traditional restocking measures. Hence, many stores are not yet fully replenished.
Import Projections for the Rest of 2020
Based on current trends and indicators, it is anticipated that imports will remain strong for the rest of the year. Nevertheless, NVOs are not entirely certain about how demand patterns will emerge after October. This is despite the strength of orders placed in China indicating a rather optimistic future for imports. A recent survey of factories in China seems to point towards this trend.
Guaranteed product. This was already included in Ho Chi Minh City.
This is a significant development given the fact that Ho Chi Minh and Yantian (China) traveling to Los Angeles and Long Beach are two of the tightest trade lanes in Asia. This is based on their vessel capacity. Moreover, strong US imports from China and Southeast Asia combined with weak US exports to Asia, have resulted in equipment shortages. Jan Hinz, head of North America and Turkey at Flexport had this to say about developments:
“There is a significant shortage of equipment in Asia…for example, 40-foot high-cube containers are difficult to secure, so shippers who are turned down for those containers should consider moving their freight in standard 40-foot containers if that’s what’s available”.
Spot Rates: Asia + East Coast
One of the consequences of these market trends is the increase in the spot rates for the Asia-East coast routes. Strengthening import demand, equipment shortages in Asia and tight vessel capacity on vessels leaving Asian ports are boosting spot rates in the eastbound trans-Pacific. NVOs are forecasting a rate of $4,000 per FEU to the West Coast when a Sept. 1 general rate increase (GRI) takes effect next week.
There has been increased demand for all-water services from Asia to the East Coast. Typically, the difference between the East Coast and West Coast rate hovers around $1,000 per FEU. However, that gap closed considerably in July as retailers concentrated their imports through the ports of Los Angeles and Long Beach. Imports through the Southern California gateway increased 33.8% in July from June. Meanwhile, total US imports in July increased only 0.9% month over month.
The impact of the COVID-19 crises and other global trade patterns will continue to impact shipping as people move to online shopping and governments increasingly import PPE. The high demand could also affect pricing as suppliers increasingly perceive the strength that they have in the market. At the moment, the more cautious industry experts are predicting a surge in demand up to October 2020. However, there are indicators that the surge in demand could go on for much longer. This is particularly true given the fact that a lasting solution to the COVID-19 virus is not yet in sight. E-commerce will increasingly become a way of life for everyone that is involved in shipping, as people continue to shy away from unnecessary human contact.