Pacific Alliance unwinds, Brazil holds the line

Through the first four months of 2026 the South America West Coast carried more tonnage than it needed. Carriers that had bulked up capacity ahead of the Lunar New Year peak kept the strings deployed into Q2 on the working assumption that nearshoring demand would absorb the slack. May is the first snapshot where it did not. Mexico, Chile, Peru and Colombia all shed roughly 7.35% on sea 40GP month-over-month — a tight cluster that says the move was supply-driven, not demand-driven.

The mechanism is straightforward. Lunar New Year emptied the inbound queue in February. Carriers held capacity through March and April waiting for the post-peak restock cycle to fill the holds back up. By the May fixing window it had not — at least not at the rates required to keep the surplus vessels deployed. The cluster repricing is the orderly exit of that tonnage.

Ecuador went further than the cluster — down 20.25% on sea 40GP, the single largest move in the LATAM pool this snapshot. Two specifics compounded the general unwind. The Guayaquil banana export window thinned as the late-season harvest petered out, taking reefer demand with it. And Chinese exporters routing intermediates for Quito assembly plants pulled inventory forward in Q1, so the May ordering cycle was thinner than the seasonal pattern would suggest.

The Iberian gateway told the same story with different fundamentals. Spain shed 19.03% on sea 40GP and Portugal 6.06% as the post-Easter European import peak unwound. Algeciras and Valencia transshipment volumes — which had been running at the upper end of normal through Q1 to feed the spring retail cycle — normalised. Sines, less exposed to the transshipment dynamic and more tied to Portuguese direct imports, held up better. The spread between the two ports is approximately the spread between transshipment-driven and end-market-driven repricing.

Carrier capacity discipline on the China-Europe trade — weekly capacity dropped to 241,000 TEU mid-month per EAA tracking — kept the Iberian decline from running deeper. The Suez routing is now stable enough at ~27 days that carriers have visibility into their cost base and will pull capacity rather than chase volume below it. May is the first month in eighteen where that discipline has read cleanly in the Iberian numbers.

Brazil moved against the cluster. Sea 40GP rose 8.7% month-over-month, the only upward print in the nine-lane LATAM pool. Two structural factors carry the lane. Santos is running at dwell times the port authority has flagged as unsustainable for the past three months — and unsustainable dwell times put a floor under the rate because no carrier wants to commit added tonnage into a queue. And the inbound order book remains heavy: BYD, Great Wall and Chery have each expanded São Paulo state assembly capacity through Q1, with the component and tooling imports that come with it.

The combination is the textbook setup for a counter-cycle move. Demand is structural — automotive capex does not unwind on a monthly cadence. Supply is constrained — Santos cannot absorb additional capacity without first clearing the dwell. So the May print is +8.7% while every other LATAM lane prints negative.