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Higher consumption in China, US contributed to rate spike

29/05/2024 10:55

Rising consumption before and after China’s Labour Day holiday, the Canadian railroad strike and concerns relating to the labour-management conflict at US ports are contributing to the ongoing spike in freight rates, according to a report released by Korea Ocean Business Corporation (KOBC).

The report stated that besides the oft-cited Red Sea crisis and the resulting shortage of vessels and containers, other factors have also accounted for the surge in freight rates.

“During the Labour Day holiday in China from 1-5 May, many places were crowded and consumption surged,” noted KOBC.

Impetus for consumption came from the Chinese government, which has declared 2024 the “year of promoting consumption” to revitalize demand. As part of the push, the government encouraged people to renovate their homes and replace old goods.

Consumers in China also received subsidies of up to CNY 10,000 (US$1,380) to replace their conventional vehicles with electric or hybrid ones.

During the Labour Day holiday, trade-ins of old goods were held, helping sales of vehicles, home appliances and furniture to go up by 5% to 8% from last year. E-commerce sales showed rapid growth, increasing nearly 16% year-on-year. Throughput in Shanghai port went up by 4% year-on-year in April, to 4.18 million TEUs.

Fears that Canadian rail workers could go on strike also pushed up Transpacific rates. Canadian National Railway and Canadian Pacific Kansas City are still hoping to work with Teamsters Canada Rail Conference to avert the strike originally planned for 22 May.
Meanwhile, US consumer demand is picking up and is contributing to an increase in US containerised imports.

According to the National Retail Federation (NRF), in March, import volume at major US container ports stood at 1.93 million TEU, an increase of nearly 19% compared to the same month of the previous year.

KOBC said: "It's expected that US demand fundamentals will continue to improve compared to the previous year, exceeding 2 million TEU by the third quarter."

Martina Li
Asia Correspondent

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