How long will U.S. line freight prices continue to rise?

The price increase of the United States line came a little "suddenly", it can be described as fast and fierce, more than a month time rose more than 2,000 dollars, from the shipping company's latest announcement of June 15 and July 1 price increase notice, July FAK freight is expected to break through 9 words, not far from ten thousand dollars.

It feels like it's back to the crazy 2021, is it too early to say "once in a hundred years"?

However, this price increase was not real, so all kinds of conspiracy theories came out. During 2020-2022, the upstream and downstream of the supply chain really feel the growth of arrival volume, things do not worry about selling, the United States retail has always maintained a strong momentum, coupled with port congestion to offset a lot of capacity, freight rates have reached unprecedented levels, and everyone is easy to understand the logic behind it.

This year is different.

After a whole year of "destocking" in 2023, this year's upstream and downstream supply chain from sellers to trailer companies to warehouses, we did not feel that the market has recovered, and various internal volumes in the field of e-commerce swept across the Pacific, from the beginning to the warehouse to the end of the process and then to the account resources, the volume to nowhere to roll.

Sellers are busy dealing with new regulations on various platforms, retail sales in the United States are not bad but not particularly good, and various economic data in the United States are sending different messages that are not in the same mood as daily life (for example, gas and food prices are not coming down).

April-may is not the traditional peak season, and the U.S. economic outlook is uncertain, so the market hit a wave of price increases.

The specific reasons for the price increase have been analyzed by many media and experts, and I would like to share a few views here. First, the drivers of this round of price increases are very different from those in 2021. The price increase during the epidemic was triggered by the long-term and large increase in cargo volume, and later the port absorbed the capacity, further worsening the supply and demand relationship. The main reason for this round of price increases is that the cumulative effect of a long and wide range of bypassing meets the "normal" restocking behavior and the "abnormal" behavior of early shipments, which occurred at the end of April and early May.

The reason why people feel that this price increase is "unreal" is that they feel that the quantity of goods has not increased, what is the real situation?

The data of May (arrival date) has just been available, let's take a look. From April to May this year, the volume of Asian American line cargo increased by 12% year-on-year, and increased by 18% over the same period in 2019. If the volume of goods in the first half of last year was still at a low point, it was a little "unfair" compared with the same period last year, then the 18% growth compared with the "normal" year in 2019 is a true fact, and the dual pull effect of replenishment and advance shipment is obvious. China's American line cargo volume increased by 7% year-on-year in April to May, an increase of 8% over 2019, the growth rate is significantly lower than the overall level in Asia, and the reasons for this are not clear to everyone. If you look at the month of May alone, Asia's growth this year is 14% year-on-year and 16% higher than that of 19 years, the growth rate is also obvious. China's growth in May was 14% year on year and 7% higher than in 2009.

At this point, we can draw the conclusion that the shipments from Asia to the United States in April and May have indeed increased significantly, and the price increase is not completely without the support of goods.

So how long can rates go up? It depends mainly on two variables: when the sailing stops and when the tide of shipments drops. The first problem is the main cause, which greatly affects the supply of shipping capacity, but is also relatively easy to judge: there is no hope or solution to the Red Sea crisis in the foreseeable next few months, and the diversion will continue for some time. Although there is still a lot of new capacity launched in the second half of the year, shipping companies still feel that capacity is not enough, as evidenced by the hot ship leasing market in recent months. From the demand point of view, as long as the current intensity of shipment and replenishment is maintained until the end of September, it is expected that the tension between supply and demand will be maintained for some time, and it also provides emotional and cargo support for continued price increases. In other words, as long as the US line has a "normal" mild peak season in the third quarter, there is a high probability that rates will continue to rise, given the general premise of tight capacity caused by detour and other factors (port congestion).