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Is trade peaking?
- Container freight rates appear to be peaking…
- …but Red Sea disruption and the risk of strike action at US East and Gulf Coast ports pose an upside risk to cargo costs
- Protectionism persists with new probes into Chinese steel trade, while China recently restricted exports of more key minerals
In what might be a bit of welcome news for trade-oriented businesses, container rates appear to be peaking. Spot shipping rates for a 40ft container are currently around USD8,100 from Asia to North Europe – down 1.3% compared to four weeks prior. It’s a similar story on the Asia to West Coast of North America route, where rates are down 16% (to USD6,400) compared to one month ago.
1.3%
Decrease in Asia – North Europe spot shipping rate MoM
16%
Decrease in Asia to West Coast of North America spot shipping rate MoM
But before we get too comfortable it is worth noting that freight rates remain high – about four times more than in early December 2023 on average globally. And the Shanghai Containerized Freight Index (which measures spot rates out of Shanghai) ticked up 0.8% w-o-w on 16 August 2024, following five consecutive weekly declines. Possible strikes at US East and Gulf Coast ports from 1 October could also push up costs further. In fact, just a single day of strike action could cause a six-day backlog at these ports, according to estimates by Sea-Intelligence (14 August 2024).
Moreover, vessel incidents in the Red Sea continue with five more so far this month, while domestic turmoil has led to congestion at Bangladesh’s largest seaport in Chittagong. According to Linerlytica, 14 ships were waiting to berth at Chittagong Port as of 18 August 2024, up from six on 19 July 2024. Container export volumes through the port were down 16% m-o-m in July due to the various disruptions, while rates to send key exports by air have spiked (The Business Standard, 12 August 2024 and Air Cargo News, 14 August 2024). Although garment factories in Bangladesh have since re-opened, trade diversion may continue. Hula Global, an Indian apparel producer that serves Western clients, said it would redirect production for the rest of the year from Bangladesh to India to mitigate disruption (Reuters, 7 August 2024).
Meanwhile, global manufacturing new export orders contracted for the second consecutive month in July, although US retail imports remain strong with the National Retail Federation expecting volumes to grow by 12% over the entire year. Chinese container volumes also remain healthy, up nearly 9% y-o-y in the first five months of this year, though Chinese exports grew less than economists expected in July (7% y-o-y).
Protectionist actions also continue with Vietnam launching an anti-dumping probe into steel from China and India, while the EU did the same into certain hot-rolled steel imports from Egypt, India, Japan and Vietnam, partly due to concerns that Chinese steel may be being rerouted.
China too announced export curbs on antimony from 15 September 2024, which may lead to a rush of stockpiling.
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