East Coast Box Bellwethers Continue To Ring

Newly released fiscal-year (FY) statistics from the Panama Canal Authority (ACP) and the latest shipping price data from Freightos both shine a positive light on U.S. East Coast box imports. To the extent cargo flows favor the Atlantic over the Pacific ports, it's good for trucking demand and bad for intermodal rail demand.

The ACP's fiscal year runs from Oct. 1-Sept. 30. FY19, which just concluded, was impacted by low water levels due to a regional drought, as well as global trade tensions. Total cargo volume came in at 252.4 million long tons (1 long ton equals 2,240 pounds), down 1% versus FY18.

Volumes of liquefied natural gas and liquefied petroleum gas rose, but drops were logged for containers, dry bulk, tankers and general cargo. Container cargo volumes totaled 56.37 million long tons, down 1.4% from FY18.

Breaking down the stats further, box volumes going from the Pacific to Atlantic (largely Asia to U.S. East Coast) rose 1% and volumes from the Atlantic to Pacific fell 5%. In other words, the Asian cargo to East Coast ports is still increasing; it's U.S. imports to Asia – most likely to China – that weigh the results.

One of America's biggest exports is waste paper. According to the ACP's commodity-level data, paper and paper product cargoes transiting the canal from the Atlantic to the Pacific fell to 95,000 long tons in FY19, down 63% from FY18.

Meanwhile, the latest index data from Freightos – which tracks the cost to ship a 40-foot-equivalent unit (FEU) container along various trade routes – offers more positive perspective on U.S. East Coast imports.

In general, box-rate performance in the second half of this year has been terrible, which bodes ill for container lines such as Maersk, MSC and CMA CGM. When there is not a significant driver (positive or negative) in terms of deployed vessel capacity, rate levels can be seen as a reasonable proxy for demand.

The Freightos Baltic Daily Index covering the trans-Pacific route from China to the North American West Coast (SONAR: FBXD.CNAW) is currently at $1,308 per FEU, the lowest it has been since late August and down 46% year-on-year. U.S. imports at this time last year were unusually elevated because U.S. buyers were front-loading cargoes from China to beat tariff deadlines.

The current cost to ship boxes from China to the East Coast (SONAR: FBXD.CNAW) is $2,715 per FEU, down 21% year-on-year.

It should cost more to ship to the East Coast, because the voyage distance from Asia is considerably longer and Panama Canal tolls are not cheap. But the spread between the two rates – the "Panama spread" (SONAR: FBXD.PANA) – varies. To the extent it widens, it can be viewed as a positive reflection on demand into U.S. East Coast ports.

That spread has indeed performed well, because the pricing to the East Coast is doing less poorly than to the West Coast. The spread is now at $1,407 per FEU – up 33% year-on-year. Editor's note: Freightos has a business agreement with FreightWaves that includes editorial coverage.

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