Chart of the Week: Freightos Baltic Index – China to North America West, China to North America East, Panama Spread  SONAR: FBXD.CNAW, FBXD.CNAE, FBXD.PANA

Spot rates for shipping 40-foot containers from China to the North American east coast jumped 23% this past week, pushing the cost over $9,000 for the first time since the index was created. The big takeaway here is that capacity is probably tapped out into the west.  

The Freightos Baltic Exchange Daily Index (FBXD) measures the average spot rates from China to the North American east and west coasts in the chart. The difference between the two rates — called the Panama Spread (FBXD.PANA) — gets its name from the canal most of the ships traverse to get to the eastern ports.The Panama Spread rarely gets above $1,500; this week it is close to $3,000.  

The sharp increase in the rate differential was caused by the disproportionate rise of the price for shipping containers to the east coast ports compared to the west coast. Rates increased as well to the west last week, but by a much smaller amount — only 10%. 

Shipping freight into the ports of Long Beach and Los Angeles is traditionally the fastest way of getting goods from China into the U.S. Most of those goods either hopped onto the rail or were transloaded into a warehouse in pre-pandemic times. 

With demand continuing to make it difficult for companies to restore their inventory levels, a lot of the freight is bypassing the stop at the western warehouses and transloading to a domestic intermodal container or a 53-foot trailer to move inland via truck. Conditions in both of these modes support the idea that the limit has been reached on the amount of freight that can be handled from the west.

Intermodal spot rates are showing a cost around $11,000 to ship containers by rail from Los Angeles to New Jersey when in June of 2019 it cost around $3,200. Keep in mind these are spot rates and represent the most volatile sample of shipment rates, but are representative of the underlying market conditions.  

Intermodal spot rates from Los Angeles to New Jersey are spiking as capacity dries up off the West Coast once again. Chart: SONAR – Intermodal spot rate from Los Angeles to Kearney.

Trucking capacity has seen some easing over the past few months as national tender rejection rates have slowly receded, but remain historically high. Rejection rates for loads moving more than 800 miles originating in Los Angeles increased back to just below 30% last week. 

Tender rejection rates for longhaul loads from Los Angeles have not settled as much as others. Chart: SONAR – Longhaul Outbound Tender Reject Index for Los Angeles

The moral of the story is that shippers are still struggling to find a way to get freight into the country and the downstream effects are far from over. The effects of the west coast congestion have already been felt in port markets like Savannah, Georgia, and Houston, which both had record import volumes earlier in the year as shippers attempted to bypass the west coast problems. The unexpected flow of freight led to extreme shortfalls in capacity in both markets. The closer we get to the fourth quarter, these events may become more numerous. 

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

The FreightWaves data science and product teams are releasing new data sets each week and enhancing the client experience.

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