Dynamic changes in China trade routes to Mexico and US West Coasts

Container shipping demand from China to Mexico experienced a remarkable 59.7% surge in January 2024 compared to the same period in 2023, escalating from 73,000 TEU to 117,000 TEU, as reported by Container Trades Statistics, positioning it as one of the most rapidly expanding trade routes globally.

As outlined in the latest Xeneta‘s Weekly Container Rate Update, the trade strength between China and Mexico has been steadily intensifying, with the annual growth rate in 2023 reaching 34.8%, a significant leap from the mere 3.5% growth observed in 2022.

This upsurge propelled Mexico to overtake China as the primary trading partner for US imports by value in Q1 2023, according to data from the US Census Bureau.

However, the substantial portion of these goods potentially being transported by truck into the US raises concerns about the utilization of the China-Mexico trade route to bypass tariffs imposed on Chinese imports to the US amid the ongoing trade tensions.

Gulf Coast ports most likely to be affected by further vessel rerouting

Concern for shippers

Throughout the past year, spot market volatility has affected major trades, yet the China to Mexico West Coast route stands out as a concern for shippers. In just over three months, average spot rates on this route surged from a low of USD 1351 per FEU in January 2023 to USD 3062 per FEU in early April.

Comparatively, the spread between the low and peak on the spot market was narrower for China to the US West Coast. In 2024, there has been a reversal of these trends, with spot rates for Chinese exports into the US West Coast almost reaching USD 5000 per FEU in February, contrasting with lower peak rates into Mexico in January.

Xeneta data reveals that average spot market rates from China to Mexico have consistently surpassed long-term contract rates since April 2023, indicating a more volatile trade into the US West Coast. This volatility intensified at the beginning of 2024, following the Red Sea crisis, with spot rates increasing by 175% in two months.

Cargo volumes decline 21% in Red Sea region

Despite starting at the same level in 2023, average spot rates into Mexico’s West Coast and the US West Coast diverged significantly, with rates into Mexico declining by 36.7% in January and increasing by 40% in February, while rates into the US West Coast increased by 84.8% in January and decreased by 8% in February.

Long-term rates

Long-term rates for container shipping from China to Mexico West Coast surpassed those to the US West Coast from July 2023 until October 2023, before converging in March 2024.

This underscores the dynamic nature of shipping markets, emphasizing the importance for shippers to consider alternative import routes alongside individual trade analyses.

Read the full report HERE.