Ocean carriers in the eastbound trans-Pacific are increasingly confident that a rate war can be avoided through the Lunar New Year period when many factories in Asia will close for about two weeks beginning in late January. They are concerned, however, that spot rates may not rebound as they normally do in the spring because carriers are scheduled to add at least 1.6 million TEUs of new capacity to the global fleet in 2024–25.

As a result, non-vessel-operating common carriers (NVOs) say some liners have approached them with offers to renegotiate their 2024–25 fixed rate, also known as named account contracts, most of which are set to expire on April 30.

It’s a play by carriers to tempt NVOs with a reopened annual contract that, while higher than the deal they signed last spring, is still below current spot rates that have fallen from an early-summer peak.

“We’ve had a couple of carriers approach us with that offer,” said Kurt McElroy, executive vice president of the NVO Kerry Apex.

Current NVO named account rates range from about $1,600 to about $2,000 per FEU. If the NVO agrees to pay an additional $1,000 per FEU, carriers are offering to lock in the new rate through the contract expiration date of April 30.

This would give NVOs a hedge if imports increase and they exceed their fixed rate allocations.

When that happened in June, NVOs were paying freight-all-kinds (FAK) rates in excess of $6,000 per FEU. Terms and conditions of the contract, such as increasing the minimum quantity commitments (MQCs), are usually negotiable, McElroy said.

Jon Monroe, who serves as an adviser to NVOs, said forwarders could use the contract re-negotiation as an opportunity to increase their MQCs and lock in the fixed rates for the next six months. In other words, if the named account rate is $2,000 per FEU to the West Coast and the NVO agrees to pay $3,000 and possibly increase the MQC, the NVO will have locked in a favorable fixed rate for the life of the contract, Monroe said.

However, an opposite scenario could also play out, according to Rachel Shames, vice president for pricing and procurement at the NVO CV International. If FAK rates tumble, as they did this January, the NVO would save money by just paying the FAK rate.

“There’s a good chance [FAK] rates will keep falling,” Shames said. “You have to look at what your risks are. Nobody knows what the last six months of these contracts will look like.”

Meanwhile, the frontloading of spring ‘25 merchandise by retailers could lift US import volumes from Asia during the normally slack months of November and December and prevent a collapse of spot rates later this year in the eastbound trans-Pacific, forwarders say.

Imports of merchandise linked to Valentine’s Day and spring activities that would normally begin shipping in December should start moving two months earlier in October, said James Caradonna, executive vice president of the forwarder M&R Spedag Group. That’s a similar cadence to year-end holiday merchandise that began arriving at US ports in June this year rather than in August.

“The entire 12-month cycle is shifting several months earlier,” Caradonna told the Journal of Commerce.

“There’s almost no ‘normal’ now,” said Shames, noting that carriers this year began levying peak season surcharges (PSSs) in June rather than in August, traditionally the beginning of the peak shipping season.

Carriers are likewise optimistic about import volumes from Asia in the fourth quarter.

The eastbound trans-Pacific “still looks pretty healthy from our perspective, between now and the end of the year,” George Goldman, president and CEO at CMA CGM North America, told the Journal of Commerce. “The reality is there was more cargo in the system than we all anticipated.”

The normal seasonal cadence on the Asia-North American trades has been disrupted by longshore labor, geopolitical conflicts and weather-related events dating back to last fall.

The threat of a strike by the International Longshoremen’s Association against maritime employers along the East and Gulf coasts was a dominant factor in forcing retailers to frontload fall and year-end holiday merchandise this past spring. The labor threat extended to the Canadian rail industry as well.

Drought restrictions along the Panama Canal have been a factor, as are the ongoing attacks by Houthi militants on vessels transiting the Red Sea that forced most container carriers to re-route vessels around the southern tip of Africa, adding time and cost to all-water services that would have gone through the Suez Canal.

Freight rates in the eastbound trans-Pacific have been fluctuating all year. The spot rate from Asia to the West Coast spiked to $8,133 per FEU in early July after a series of general rate increases (GRIs) but is now down to $4,500 per FEU, according to Platts, a Journal of Commerce sister company within S&P Global. The East Coast spot rate surged to $10,133 per FEU on July 5 but has fallen to $5,600 per FEU, according to Platts.

Amid the rising rates, carriers this year launched or re-instated 10 services from Asia to the West Coast. Liners are also running 28 single-voyage extra-loader vessels to the ports of Los Angeles and Long Beach — 14 to each port — in September and October. As a result, NVOs say they are encountering no space limitations to the West Coast.