Dive Brief:

• Ocean freight rates from China to both U.S. coasts fell consistently throughout the first three weeks of September, according to data from the Freightos International Freight Index.
• Transpacific rates fell 2.04% to an average of $1,487 per twenty-foot container, compared to August's average of $1,518. Rates from China to the East Coast also fell 5.98% to an average of $2,316 per TEU, down from $2,464 the previous month.
• Rates on the transpacific lane are 8.44% lower than they were in September 2016. However, they remain largely unchanged when shipping to the East Coast, marking only a 0.62% increase. This is despite a 30.3% year-over-year increase in rates in August.

Dive Insight:

The decline in freight rates over the past three weeks have sparked industry concerns a new war over freight rates is brewing. But should it?

Last week, The Loadstar reported carriers are "jostling for market share" ahead of the holidays, which includes preparation for China's Golden Week holidays. Analysts at Alphaliner put it plainly, noting: "the rate truce that carriers have largely abided by since Hanjin's sudden exit one year ago, now appears to be crumbling," according to Splash 24/7. Both of these reports were based on the observation that the Shanghai Containerised Freight Index (SCFI), an industry standard, had fallen for six consecutive weeks indicating a trend in rate cuts.

The trend is particularly concerning due to its timing. Typically, peak shipping season would indicate a rise in freight rates, and the industry is just barely recovering from the demise of Hanjin Shipping, and the chronic overcapacity that symbolized. However, carriers' orderbooks have yet to slow as they continue to seek competitive advantages. Low rates are one way to do this.

A silver lining: The dip in September follows an unusually high-rate month in August. As a result, rate declines may merely be a way for the carriers to balance rates after implementing a surcharge and optimize utilization. September transport prices remain far above those seen in June and July.

Whether the decline is structural or natural must yet be defined, but industry stakeholders should keep a close watch on how lower rates affect carriers' profits, which may determine stability.