The ongoing supply and demand imbalance is driving down container prices on U.S. trade routes, as ocean carriers deploy more ships in a soft market.
Spot rates as of Dec. 11 from Asia to the U.S. West Coast fell 2%, or $33 per forty foot equivalent unit (FEU) in the latest week, to $1,861 per FEU, analyst Xeneta said in an update. Short-term pricing looks softer after a previous rebound.
Rates are down month-on-month by approximately 22%, or $511 per FEU, from Nov. 11, "underlining how much pricing power carriers have given up over this period."
On Asia-U.S. East Coast headhaul, weekly rates were down a modest 1.5%, or $41 per FEU, to $2,709 per FEU, after earlier firming stalled.
Rates are down closer to 9%, or $257 per FEU, from Nov. 11, a "clear month-on-month correction," despite small weekly changes.
"Looking at the fundamentals of supply and demand on major fronthaul trades right now and it doesn't stack up, so something has to give," said Xeneta Chief Analyst Peter Sand. "Spot rates are relatively flat even though offered capacity is going up, particularly from Far East to U.S. East Coast, North Europe and Mediterranean.
"Carriers will try to push further rate increases in mid-December - and we may see a slight uptick - but this won't last for too long due to the downward pressure from increasing supply. The impact of higher supply will be seen most acutely on U.S. fronthauls where demand isn't as strong compared to trades into Europe."
Capacity for Asia-U.S. West Coast in the latest week increased 1.7%, or 5,300 twenty foot equivalent units (TEUs), with no indication supply would be pulled back. In fact, signs point to more space being made available.
Month-on-month capacity was slightly higher by 0.4%, or 1,300 TEU. Shippers stand to benefit from broader stable-to-rising supply amid sharply lower rates, Xeneta said.
On Asia-U.S. East Coast services, capacity was 10% higher week-on-week at 17,400 TEU, pointing to a "decisive" build-up and downward pressure on spot prices. Month-on-month capacity grew 16% to 26,300 TEU.
"There are increasing signs of a gradual return of container ships to the Red Sea region, highlighted most recently by CMA CGM Indamex service now transiting the Suez Canal on fronthaul and backhaul voyages," Sand said. "This will only add to the downward pressure on rates, particularly on trades from Far East to U.S. East Coast and Europe, which transit the Suez Canal."
Analysts estimate as much as 2 million TEUs in annual capacity returning to the Red Sea-Suez Canal route after a transition period - when and if major carriers decide to realign rotations.