News / Transpacific box line freight rates nosedive as demand falls

© Clare Jackson

The Asia – US spot rate components of the Freightos Baltic Index (FBX) slumped this week by 19% and 7% respectively for container shipments to the US west and east coasts.

According to the FBX reading, US west coast spot rates fell to $12,596 per 40 ft – their lowest level since July last year. For US east coast shipments FBX’s spot rate declined to $15,973 per 40 ft.

“As demand falls and space becomes available, ocean rates continued to fall this week,” said Judah Levine, head of research at Freightos.

“In addition, the past weeks have seen the removal of many of the premium surcharges securing capacity,” explained Mr Levine.

Meanwhile, spot rates continued to tumble on the Asia – North Europe tradelane with carriers discounting rates for prompt shipment down to $8,000 per 40 ft from Shenzhen to Rotterdam.

However, shipments to the UK are still commanding a premium of about $1,000 per 40 ft.

Notwithstanding individual carrier discounting, Drewry’s WCI, Xeneta’s XSI and the FBX indices settled on a range of between $10,000 – $10,750 per 40 ft this week, reflecting a 25% decline since the beginning of the year.

According to a local forwarding contact, there are hopes of a re-opening of Shanghai by mid-May which will result in a rush of cargo and potentially push rates back higher, especially if there is a shortage of equipment.

“Diverted shipments and empty container shortages were major factors in the extent to which previous lockdowns in China disrupted ocean logistics,” said Mr Levine.

But he is optimistic that as ports have remained largely operational during the lockdown, allowing the discharge of empty containers needed for export, the disruption will not be as extreme as seen previously.

In the interim, ocean carriers are blanking some sailings from China. According to Lars Jensen, CEO of consultancy Vespucci Maritime, the number of voided voyages may be about to snowball.

“Unless Shanghai re-opens soon, the carriers are likely to further increase the number of blank sailings as well as also increasingly omit Shanghai port to safeguard the integrity of the rest of their networks,” said Mr Jensen.

Moreover, the consultant suggests that in the longer term the Covid zero-tolerance policy of the Chinese government could prompt importers to “begin to contemplate shifting production out of China”.

“This will be a slow exodus of production likely to be to the benefit of manufacturers in other countries throughout Asia,” said Mr Jensen

Elsewhere, the transatlantic tradelane is not showing any sign of weakening, with for example, the XSI reading for Europe to the US east coast climbing by a further 5% this week to reach $8,991 per 40 ft.

Just 12 months ago spot rates on the route were about $3,500 per 40 ft and a year before that shippers were paying in the region of $1,900 per 40 ft, the market having been stable – and profitable for carriers – for several years.

Although contract rates on the transatlantic have been concluded at a third of spot rates, several shippers trading on the route have complained to The Loadstar that carriers have refused to renew their contracts for this year forcing them onto the spot market.