Trade Panic: China To US Weekly Spot Rates For 40' Containers Collapse

A continued slowdown in the rate at which weekly spot rates for 40' shipping containers are being shipped from China to North America suggests US demand for Chinese goods continues to stumble, and signals a broader economic slowdown globally looms.

The Freightos Baltic Index (FBX) represents ocean freight prices for 40' shipping containers, is published weekly on Sundays and represents the price of the previous week (Sunday through Saturday). Prices used in the index are rolling short term freight spot tariffs between carriers, freight forwarders, and high-volume shippers. Index values are calculated by taking the median price for all prices on active lanes with weighting by the shipper.

During the last sixteen weeks, FBX 40' shipping container rates from China to North America have seen a dramatic move lower, raising concerns about the health of underlying demand.

The North America West Coast to China/East Asia Index (FBX02) is down 39% since early November highs, retesting the 50% Fibonacci retracement level late last month and recently broke below December's lows, is expected to probe 61.8%-Fib in the coming weeks. 

The index had a notable impulse starting in March/April 2018, the move lasted 224 days and sent the index up 218% - thanks to President Trump's trade war against China, which forced US importers to pull orders forward to get ahead of tariffs. However, by early November, rates collapsed after the importers were finished, with no signs of a trough in early March.

The North America East Coast to China/East Asia Index (FBX04) is down 26% since the end of November highs, is currently retesting the December lows when global markets were in a panic about slowing growth. 

FBX shipping data shows 40' shipping container rates are experiencing the worst pressure in North America East Coast to China/East Asia, China/East Asia to Europe, and North America West Coast to China. 

As a whole, the FBX Global Index shows container rates are in danger of taking out their December lows, signaling that the global slowdown is not a "glitch," but rather the start of a severe synchronized downturn. 

On top of container rates plummeting, world trade has slowed in recent months, and leading indicators point to ongoing deceleration.

Of course, the FBX data is just the latest in a long line of worrying news for the Chinese economy but now shows the global slowdown is contagious, infecting the US economy where growth is expected to be less than 1% to near zero for 1Q19.