Transpacific: No signs of commodity price-out
In issue 523 of the Sunday Spotlight, we examined the relationship between Transpacific cargo weight and value, to determine if the unprecedented increase in freight rates over the past year has created a situation where low-value commodities are being priced out by higher-value commodities. That said, we have to stress that the analysis does not provide any basis to claim that low-value cargo owners are not being squeezed out of the market, as it is entirely possible that a price-out happens within commodity groups, rather than across commodity groups. Unfortunately, the US Census Bureau data does not support conducting an analysis on cargo owner level.
We started our analysis by looking at the Asia-USWC spot and contract rates along with the USD customs value per KG of containerised cargo moved on the Transpacific. Presumably, if the high freight rates are pushing out low-value cargo, we should see the average value of the cargo increase, as freight rates go up. This was, however, not the case. The swings in the second half of 2020 were well within the long-term variability. We followed this by an examination of HS2-level commodity groups but did not find any discernible differences between the higher-value and low-value commodity groups. We did the same for the HS6-level commodity groups as well, coming to the same conclusion.
Finally, as shown in figure 1, we charted the relationship between cargo value in USD per KG of cargo weight (Y-axis) versus the Y/Y growth in cargo weight in May 2021 over May 2020, for 909 different HS6-level commodity groups with cargo weight in either month of more 1,000 Metric Tonnes, accounting for 92.2% of the entire Transpacific container trade. Once again, we did not find any statistically significant support for the hypothesis that low-value commodities are being priced out.
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All quotes can be attributed to: Alan Murphy, CEO, Sea-Intelligence.
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