The truth about the peak season ahead

The truth about the peak season ahead

There’s been substantial commentary around the lack of a perceived peak season in 2023 however given the rapidly changing situation across the ocean’s trade routes, how accurate does this claim continue to be?

Whilst traditionally the premise of a peak season is based on the volume of how much merchandise is moved from Asia to the markets of North America and Europe throughout the months of July to October, volume is only one factor that needs to be taken into consideration when speculating upon the peak season ahead.

Whilst the traditional “peak in trade volume” may not appear, the market is performing in a way reflective of a peak season. A tipping point of capacity withdrawals combined with potential signs of a volume recovery due to inventory restocking has altered the spot market in recent months, sending rates upward from their post-pandemic lows.

This indicates that there may be a disconnect between the claims of a muted absent peak season and the freight market in the coming months and 2024.

For example:

  • Carriers have introduced general rate increases (GRIs) in April, June and July, with the most one in August.
  • Average spot rates from Asia to the US West Coast have increased from $1,000 per FEU to $1,700, reflecting growing market tightness.
  • Recent reports of cargo rolling in Asia also reflect this reality.

According to Linerlytica, vessel utilisations in the trans-Pacific have increased significantly over the past several weeks, aided by diverted booking volumes from Canada West Coast gateways and more blank sailings in July.

The factors leading to this tipping point include the underlying resiliency of the US economy, with the much-anticipated recession failing to materialise, reflected in the revised GDP growth forecast of 1.8% this year, revised upward from a forecast of 1.5% growth in July.

In addition, the container ship order book is larger than ever before and ocean carriers are getting more aggressive in pulling back on capacity. According to Sea-Intelligence Maritime Analysis there is a clear correlation between the sharp uptick in blank sailings activity on the trans-Pacific at the end of June, and the subsequent improvement in spot rates.

These factors, combined with an anticipated volume recovery and improved trade dynamics should see the peak season in a more solid state as trade dynamics improve over the remainder of 2023 and transition to a more normalised level of consumer demand and retail inventory stocking levels.

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