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Spot freight rates on the Pacific trade lane remain stable due to a deliberate reduction in capacity, a strategy carriers have adopted to mitigate rate declines. The approach involves canceling scheduled sailings, a tactic known as blank sailings, which artificially tightens available space on key routes. This method has become a critical tool for carriers seeking to prevent a rapid decline in rates, particularly as demand shows signs of cooling after a period of raised pricing.
Blank sailings mask a weakening market
Data from Xeneta shows rates to the U.S. West Coast fell 1% last week, while East Coast rates held steady. The marginal decline on the West Coast, though modest, signals the beginning of a trend that analysts anticipate will accelerate in the coming weeks.
Xeneta’s senior shipping analyst Emily Stausbøll noted the gradual decline follows a predictable cycle, one that mirrors historical patterns in container shipping. During periods of market peaks, rates often surge rapidly as carriers capitalize on high demand, but the subsequent correction tends to unfold more slowly. Stausbøll said: “The gradual softening shows how rates fall far slower than they increase during a market spike.”
Sailings are being canceled on Asia-North America routes, though carriers remain hesitant to commit to large-scale reductions. Stausbøll explained that no individual carrier wants to be the first to pull significant capacity when competitors can step in and take their volumes, which limits the scope for capacity management to reverse the spot rate decline.
The current strategy also reflects the broader tension between short-term profitability and long-term market stability. Carriers are acutely aware that aggressive capacity cuts could backfire if demand rebounds unexpectedly, leaving them unable to meet customer needs. Conversely, failing to act decisively risks a rapid unraveling of rates, particularly if one carrier breaks ranks and undercuts prices to secure volumes.
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Geopolitics as a rate stabilizer
A recent Xeneta update indicated carriers might use the U.S.-Iran conflict to justify additional surcharges, a tactic that highlights the industry’s reliance on external factors to prop up rates. While the operational impact of the conflict on container shipping was minimal—most vessels avoid the Arabian Gulf due to security risks—the perceived threat of disruption provided carriers with a pretext to introduce temporary fees.
That influence faded over the weekend as tensions between the U.S. and Iran de-escalated, leading to a sharp decline in oil prices. Brent crude prices dropped nearly 8% from a peak above $96 a barrel.
Market conditions—rising capacity and cooling demand—remain unchanged, a reality that Stausbøll emphasized in her analysis. “The market fundamentals of rising capacity and cooling demand are working against carriers. While geopolitical tensions may slow the softening, they will not defy gravity,” concluded Stausbøll.
For now, the approach of using blank sailings and geopolitical tensions to stabilize rates has proven effective in maintaining carrier profitability. However, the underlying issues persist, and the industry’s reliance on short-term fixes raises questions about the sustainability of the current equilibrium. If demand continues to weaken, even aggressive capacity cuts may not be enough to prevent a further decline, particularly if carriers begin competing more aggressively for volumes.
The coming weeks will be critical in determining whether the current stalemate holds or if a carrier breaks ranks, accelerating the rate decline.
