The container industry has seen major developments in the past month: the mandate to use more expensive low-sulfur fuel, the Phase One trade deal between the U.S. and China, and most recently, the coronavirus outbreak.
Amid all this change, how is the ongoing rivalry for Asian cargo faring between the U.S. West Coast and East Coast ports? In 2019, New York, Charleston and Savannah were gaining ground at the expense of Los Angeles and Long Beach. Is the eastward momentum rising or falling?
The latest data implies that the move to the East is accelerating.
One way to measure demand for each route is container pricing. The daily price to ship a forty-foot-equivalent-unit (FEU) container on various routes is tracked by the Freightos Baltic Index. Assuming that the rate is a rough proxy for demand, if shippers are favoring the East Coast, the FEU price from China would increase over time at a faster pace than the FEU price to the West Coast.
Over the past year, the Freightos China-to-West Coast index (SONAR: FBXD.CNAW) is down 27%, whereas the China-to-East Coast index (SONAR: FBXD.CNAR) is up 25%.
The evidence from this time period is not as clear-cut as it seems, however, because pricing at the end of 2018 and early 2019 was affected by shipper fears over Trump administration tariffs. Importers rushed to pull forward cargoes before tariffs were enacted, which inflated pricing.
Because time was a factor, that importer pull-forward activity went through Los Angeles and Long Beach, not the longer route via the Panama Canal to the East Coast. Thus, it makes sense that there has been a year-on-year decline in pricing from China to the West Coast because it was unusually high a year ago.
In light of this trade-dispute anomaly, a better test is the change in rates over a two-year period. Here too, the data shows East Coast gains.
The two-year chart clearly shows the tariff pull-forward effect that brought the West Coast pricing trend line above the East Coast trend line in the second half of 2019 and early 2020.
It also shows that pricing to the East Coast is now up 30% from China versus two years ago, whereas pricing to the West Coast is flat over the same period.