Liners confident of pushing through rate rises on surging transpacific business

Liner executives are reporting a dramatic pick-up in box bookings between China and the US this week as a 90-day mini-reprieve in the tariff war between the world’s two largest economies gets underway.

The busier liner bookings have yet to translate into an immediate rate surge, but analysts are confident carriers will make strong profits this summer.

Starting yesterday, cargo leaving China bound for the United States will carry a 30% tariff rate – a reduction from the higher 145% tariff that was in place for six weeks. The United States and China announced a dramatic de-escalation in tariffs on Monday, lowering cripplingly high rates for 90 days. Experts say retailers will likely frontload more cargo during the pause, working against the clock to bring in inventory before things change again.

Yesterday, Hapag-Lloyd management highlighted that China-US bookings this week have jumped by more than 50% compared to what had been seen during the prior four weeks, and they are up “double-digit percentages” relative to what was seen prior to the aggressive tariffs that were put in place in early April.

Peter Sand, chief analyst at Xeneta, a freight rate platform, told Splash today there had been a 2% lift in transpacific freight rates this week, and a very noticeable reduction in blank sailings by carriers. Sources tell Splash also that carriers are seeking extra loaders to move the bumper amount of cargo, presaging an early start to peak season.

Sand said he expects transpacific rates to climb by 20% rise over the coming month.

“Rates are up a couple hundred dollars but carriers are pushing for larger increases for June,” commented Hua Joo Tan, co-founder of Linerlytica, an Asia-based container shipping consultancy.

“Already freight rates had been better supported as liners adjusted capacity, with Asia-USWC spot rates bottoming in March at just below $2,000/feu, rising to $2,500/feu coming into this week and are now quoted at above $3,000/feu,” Jefferies, an investment bank, noted in an update yesterday.

“While we expect carriers to reactivate capacity and deploy bigger ships in the transpacific, we note that repositioning boxes and vessels following the recent steep capacity withdrawals could take time,” HSBC stated in a new container report issued today, warning of the potential for bunching of ship calls causing port congestions and bottlenecks on the landside logistics, similar to what was witnessed during the covid pandemic. HSBC is expecting rate increases scheduled for mid-May and early June to stick, noting how the share prices of global liners have now surpassed the pre ‘Liberation Day’ levels reflecting to some extent the much improved outlook.

“If demand does pick up sharply, shippers may face a period of tight capacity and equipment shortages as volumes rebound and vessels and containers are still being moved back into place. The quick restart could also mean a big bump in the number of vessels and container volumes arriving at US ports in a few weeks,” Freightos, a box booking platform, suggested in a market update.