According to the latest data from CNBC Supply Chain Heat Map, a US financial website, US manufacturing orders in China have dropped by 40% due to a slump in demand.

Carriers have been executing aggressive capacity management strategies, announcing more blank sailing and service suspensions to balance supply and demand.

“Container rates from Asia continue to fall as demand collapses, forcing carriers to cancel more sailings than ever before at a time when vessel utilization is at record lows,” said Joe Monaghan, CEO of Worldwide Logistics Group.

U.S. logistics operators are bracing for delays in shipments from China in early January due to canceled sailings by container ships and delays by ocean carriers.

Total China-to-U.S. container volume down 21%

Joe Monaghan also noted that factories in China are expected to shut down two weeks earlier than usual during the Chinese New Year due to lower orders. January 21st is Chinese New Year. The seven days following the festival are considered national holidays. "Many manufacturers will be on holiday in early January."

Project44, a US supply chain digital services company, said that after record trade levels during the epidemic blockade, since late summer 2022, there has been a marked pullback in TEU (twenty-foot equivalent unit) shipments from China to the US, including a 21% decline in total volumes between August and November.

Asia-based global shipping company HLS issued a warning to customers in a recent newsletter about the ocean freight business environment.

"This seems to be a very bad time for the shipping industry. As new ships enter the market, we are facing the double problem of falling demand and excess capacity." HLS analysts predict that container volume will decline further by 2.5% in 2023 , while capacity will increase by almost 5%-6%, which will continue to have a negative impact on freight rates in 2023.

"Economic uncertainty, geopolitical concerns, and increasing market competition will further complicate the container shipping market," HLS said.

U.S. West Coast ports hit hardest

Trade data cited by HLS showed U.S. imports from Asia plummeted to their lowest level in 20 months in October.

Container spot prices from Asia to the US West Coast have crossed the break-even point with "little room for further reduction".

Project44 vice president Josh Brazil said the large West Coast ports of Los Angeles and Long Beach experienced the biggest drop in trade as shippers diverted some of their cargo to the East Coast to avoid the risk of major union strikes at West Coast ports.

HLS expects most carriers to extend U.S. West freight rates to December 14 at $1,300-$1,400 per 40-foot unit (FEU). However, freight rates to the US East are expected to drop by $200 or $300 in the first half of December, to an average of $3,200-3,300/FEU.

Blank (cancelled) sailing data show that vessel capacity on the trans-Pacific route (China to the US) continues to drop significantly.

The 2M alliance of Maersk and MSC has suspended nearly half of its US West Coast services for December. The Ocean Alliance (CMA CGM, COSCO SHIPPING, OOCL, and Evergreen) and THE Alliance (Ocean Network Express, Hapag-Lloyd, HMM, and Yang Ming Lines) have cut overall vessel capacity by 40-50% until Chinese New Year.

As a result, shippers see tight cargo space on transpacific routes, reduced service reliability, and carriers including MSC and Hapag-Lloyd are not accepting cargo on transit voyages in an effort to make up time.

According to the logistics manager, this would cause a two-week delay. In its latest notice to customers, MSC said the "ETA is for reference only and is subject to change without notice."

U.S. imports from Europe rise

Unlike the drop in orders to China, trade data analyzed by Project44 shows that the trade route from Europe to the US is “probably one of the most surprising and certainly most important developments since the start of 2020,” said Josh Brazil.

"This sharp rise cannot be explained by the epidemic alone. But a strategic shift away from over-reliance on trade with China and geopolitical tensions with Russia are the main drivers of the EU-US trade boom," he said.

The global trade map is being rapidly redrawn, with EU-US trade and investment rising sharply as the West's economic relationship with China comes under scrutiny. This year, the U.S. imports more goods from Europe than China, in a big shift from the 2010s, according to Project 44.

"For their part, European manufacturers battling sky-high energy prices and inflation are increasingly exporting and investing in the U.S.," Josh Brazil noted.

German exports to the U.S. rose nearly 50 percent in September from a year earlier, according to Project 44. In a year-on-year comparison for the first nine months of 2022, the German mechanical engineering industry's exports to the United States increased by almost 20%.