US steps toward maritime protectionism aimed at reviving the US shipbuilding industry resurfaced this week for the first time since the suspension of proposed port call fees on Chinese vessels late last year.
The administration’s Maritime Action Plan – which does not give a timeline for implementation – features a long list of possible steps including a proposal for port fees of between one and twenty five cents per kilo of freight arriving on foreign-buillt vessels. Ocean expert Lars Jensen estimates these fees would range from about $150/FEU for a one cent per kilo charge to a maximum of a prohibitive $3,750/FEU.
Other recent US trade-related developments include the White House considering lowering steel and aluminum tariffs for consumer goods, a – symbolic, but partially Republican-backed – House of Representatives bill passed last week invalidating tariffs imposed on Canada last year, marking the highest profile challenge yet by Republicans to Trump’s tariffs, and rising tensions in the Panama Canal port operations dispute, with Hutchinson Ports threatening legal action against Maersk’s terminal operator if it takes steps to take over the disputed ports.
One impact of the US trade war has been a diversification of trade partners and increase of commerce between non-US economies, with several long-running negotiations being spurred to completion as a result, including a EU – Australia trade agreementwhich is nearing completion. Likewise, this trend of exporting countries seeking alternative sources for growth is also being reflected in ocean freight flows, with carriers shifting some capacity and resources to Far East – W. Africa lanes as demand increases. This shift may also be a factor in recent service reductions on the transatlantic.
Hapag-Lloyd has agreed to acquire ZIM, marking the most significant acquisition in the container market in quite some time. The deal requires shareholder and various regulatory approval and if approved won’t be completed until late this year.
With the purchase Hapag-Lloyd will remain the fifth largest carrier by capacity, but adding ZIM – currently the tenth largest carrier with more than 700k TEU according to Alphaliner – would push it closer to the number four spot with more than three million TEU combined. That capacity will help Hapag-Lloyd, whose Gemini Cooperation partner Maersk was also a bidder, increase its overall market share, particularly on the Far East – N. America and transatlantic lanes.
Container rates continued to ease on east-west lanes last week as the Lunar New Year holiday period got underway. Asia – US East Coast prices fell 12% to about $3,000/FEU and back to early December levels before pre-LNY demand picked up. Asia – N. Europe rates dipped 5% to about $2,400/FEU, also back to December levels while prices to Mediterranean ports fell 4% to $3,600/FEU but remain several hundred dollars above its level in December.
The end of pre-LNY demand is letting rates slide on Asia – Europe lanes even as weather disruptions continue to cause significant delays and backlogs at many Western Med and N. Europe ports and carriers introduce disruption surcharges on some lanes. Strong winds and high waves which have come and gone several times over the last few weeks made N. Atlantic transits difficult again mid-last week. Conditions improved and operations resumed over the weekend and carriers don’t expect additional weather disruptions this week.
Carriers will blank a significant number of sailings across these lanes over the holiday period, which should slow the rate decline. The FBX Global benchmark rate is 44% lower than it was last year, pointing to the impact of a growing fleet, which is also starting to be reflected in falling carrier revenue.
Air cargo rates from China to the US remained elevated last week at $7.40/kg and prices to Europe increased 8% to $3.60/kg, possibly reflecting some last minute pre-LNY push, though pre-holiday demand was reportedly subdued compared to typical volume increases this time of year.
Judah Levine, Head of Research, Freightos Group
