After-shocks from the US/Israeli strikes on Iran appear to be diminishing according to Drewry Shipping Consultants as spot rates falter on the regional trade.
Drewry’s latest Intra-Asia Container Index (IACI) published on 25 June fell 4% week-on-week with significant declines on the Shanghai to Manila and Shanghai to Jawaharlal Nehru port at 26% and 8% respectively, with Drewry’s senior advisor Stijn Rubens adding that other trades had seen similar falls.
According to Rubens it has been a similar story over the past fortnight with Laem Chabang and Ho Chi Mihn City also seeing similar spot rate erosion.
“It’s a bit too early to really make a lot of noise about,” said Rubens. “But what that is about is a reduction in [port] congestion.”
Uncertainty in the market has caused a mini-peak, said Rubens, and that has led to some shippers looking to increase their inventories.
Although Drewry believes that there will need to be some more data in coming weeks to confirm the trend the feeling is the regional trade may have already peaked.
“We think it's a combination, it's the consumer-facing brands that want to increase their safety stocks, they want to build their inventories, causing this mini-peak season, and as a knock-on effect, also the intermediate goods have been shipped earlier. So, we think we're now seeing a slowdown in the intermediate goods,” commented Rubens.
Drewry believes that the easing of regional port congestion and easing demand will most likely be felt by the end of July
Other considerations, when it comes to projecting demand in the immediate future is the uncertainty around the 60-day ceasefire in the Middle East, while the Asian monsoons are also causing disruptions at key south Asian gateways.
Frontloading has also been cited by freight forwarders as a likely explanation for the recent surge, with the expectation that the spike in demand will be short lived.
Moreover, Drewry said: “Trade tensions between the US and China, combined with elevated tariff barriers, have continued to encourage supply-chain diversification.”
Those tensions could become more intense as the emergency tariffs imposed by the Trump administration under the International Emergency Economic Powers Act, which are due to expire on 26 July.
However, Washington DC-based lobby group, Brownstein, is warning its clients that the administration is planning to introduce longer-term tariffs under the legislation that protects the US from certain trade practices, such as forced labour practices. US authorities are currently investigating the manufacturing practices and policies of some 86 countries.
