The decline in trans-Pacific spot rates to the US East and West coasts shows that capacity remains adequate despite growing concern over tight space and the rolling of containers in favor of higher-paying cargo.

The rate from Shanghai to the US West Coast per FEU fell 3 percent from last week and 16.8 percent from one year ago to $1,495, while the rate to the East Coast was down 5.8 percent week to week and 7.1 percent year over year, according to the Shanghai Shipping Exchange’s SCFI.

The declines during the heart of the peak season occurred as several carriers pushed rate increases of $600 to $1,000 per FEU to take effect Friday, September 1. A similar pattern took place on the Asia-Europe spot market, indicating that although global container trade is set to grow at the fastest pace in six years, deployed tonnage remains adequate to handle demand.

 

The abrupt loss of Hanjin Shipping’s capacity and subsequent impact on ocean shipping rates appears to have run its course. At the same time last year, when Hanjin collapsed, trans-Pacific spot rates to the West Coast jumped 51.4 percent week to week to $1,746 per FEU, while rates to the East Coast increased 45 percent to $2,441.

Capacity already in service being enough to meet demand is unlikely to change in the short-term, as recent figures from industry analyst Alphaliner revealed that the idle container ship fleet has fallen to its lowest level in two years. The unemployment rate for ships now represents 1.8 percent of global container capacity, down from 2.3 percent on August 7.

Over the medium-term, there is still a good chance that capacity and demand converge, as carriers have refrained from ordering new tonnage, especially the larger ships of more than 15,000 TEU that can overwhelm the market.

After ordering nearly 2.5 million TEU in 2015, carriers ordered 205,697 TEU in 2016, according to IHS Markit order book data. Until CMA CGM’s order of nine 22,000-TEU ships in August, only 58,892 TEU had been ordered this year, with all orders for ships smaller than 2,999 TEU.