Turbulence ahead: A slowdown in global demand is underway

Pricing risks could be next, but monetary conditions can remain tight

This is supposed to be the busiest season for containerships ferrying goods from Asia to the US, as retailers stock up, first for the “back-to-school” shopping, and then for the upcoming holiday season. However, freight rates have been falling, and on routes like Shanghai-Los Angeles, they have halved from their 52-week highs. Given that shipping capacity has not yet expanded meaningfully (that should start over the next year), this implies very weak freight demand.

As important is the sharp fall in lead times. On key routes from China to the US, these have fallen from 83 days to 63 days over