After a new pattern at the start of the year, July saw a modest realignment between charter and freight markets. This comes as liner operators react to cost pressures and the industry awaits the affects of the potential trade war between the US and China, the latest Container Shipping Forecaster from MSI noted.
After an impressive run since the end of 2017, timecharter earnings have come on level terms recently, a slowdown that started with smaller feeder vessels and has now spread to larger units. While the charter market slowdown is partly seasonal, the lower level of activity will impact larger units, Daniel Richards, Analyst at MSI said.
For feeder vessels, where there have not been notable service reductions, it is more likely that liners are holding back for other reasons: either to take some steam out of the market, or out of prudence given potential trade war effects on regional trade routes. We now see limited upside for charter earnings over peak season given moves by liner operators to restructure services and restrict capacity.
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Freight markets saw an improved performance in July, even if holding onto recent gains is proving difficult. MSI expects 2018 to avoid this trend, and that Transpac rates over peak season will be about 10-15% above 2017 levels, and Asia-Europe around 5%.
In addition, short-term mainlane growth will improve, but will not reverse the impacts of weak growth. Early indications from US ports and bills of lading processing indicate that June import volumes increased.
What is more, while the noise around the imposition of trade tariffs focuses on the mainlane trades, their potential impact will be felt more widely, Daniel Richards added.
It now seems unavoidable that the US and China will levy tariffs on the large part and quite possibly all of their bilateral trade flows. The largest effects will be felt on the eastbound Transpacific, but the key area to watch is how far tariffs on US imports risk disrupting complex cross-border supply-chains which feed into finished products and which are especially key to the high density of regional and feeder services in the intra-Asia market.
