News / 'Massive volatility' driving container spot rate disparity

Hong Kong container terminal. Photo: © Mariusz Bugno, dreamstime.com

It will be of no surprise to anyone in the container shipping industry that container spot freight rates on the main east-west trades rose this week, as conflict in the Persian Gulf shows no sign of abating – although the quantum of the increases appears less severe than feared.

However, the inherent volatility of the situation led to a widening divergence between some of the main spot rate indices.

This week’s World Container Index (WCI) from Drewry saw its Shanghai-Rotterdam leg gain 19% on the week before, to end at $2,443 per 40ft, and while the short-term market average rate on Xeneta’s XSI for Far East-North Europe shipments was at a similar level this week – at $2,345 per 40ft – it only registered a 2% week-on-week increase.

Xeneta head analyst Peter Sand, speaking on next week’s Loadstar Podcast, said the platform was seeing an emerging disparity between prices paid on the Asia-Europe trades.

“Some of our Far East-North Europe customers are looking $4,000 per 40ft in a few days, if not already.

“It’s not the market average, I can tell you, but during times like this we really see massive volatility and an opening of the spread for what customers are actually paying their forwarders and carriers,” he explained.

In addition to widespread emergency fuel surcharges, Asia-Europe carriers wasted little time, following the first launch of attacks on Iran, to introduce new FAK price levels, which have been successively raised.

For example, MSC had announced a new Asia-North Europe FAK rate of $4,000 per 40ft for 15 March, and this week increased it to $4,700 from 22 March.

CMA CGM and Hapag-Lloyd also intend to implement $4,000 per 40ft FAK rates to North Europe on 15 March.

However, the success of these hikes remains far from assured, as forwarders on the trade have already experienced spot rate discounting.

“For Far East westbound, we saw the initial rate increases of around $4,000 come through for the second half of March – however, these are adjusting lower than initially published,” one forwarder told The Loadstar, adding that they had experienced no delays to loading nor any issues with finding space.

However, they added that “we have been advised that the emergency bunker fuel surcharge is on top of all NAC/FAK agreements”, indicating that material prices for shippers will rise.

Source: Drewry

Carriers have adopted a similarly aggressive FAK policy for Asia-Mediterranean shipments, with CMA CGM implementing a $5,600 per 40ft rate to West Mediterranean cargo for 15 March, followed by $6,700 on 22 March.

This week, the WCI’s Shanghai-Genoa leg rose 10% week on week, to finish at $3,120 per 40ft.

It was a different picture on the transpacific trades, which are presently operationally sheltered from events in the Persian Gulf.

The WCI’s Shanghai-Los Angeles rose 4% week on week, to finish at $2,503 per 40ft, while its Shanghai-New York leg gained 3% week on week, to end at $3,080 per 40ft.

In contrast, the XSI’s Far East-US west coast route market average short-term rate contracted 5% week on week, to $1,985 per 40ft, which Mr Sand said was largely the result of continuing weak demand.

“We have seen freight rates the Far East into, to the US east and west coasts softening somewhat this week, despite four weeks of carriers offering quite low levels of capacity.

“I think one thing for sure, is that demand into the US is really weak at the moment, so that’s keeping a lid on transpacific rates,” he explained.

US west coast forwarder Freight Right confirmed this view: “The market has yet to see a fresh surge of orders from the US side, keeping the overall supply-demand balance relatively flat, despite the resumption of operations,” it said, adding that the “real” rates forwarders were paying to the USWC was around $1,500 per 40ft and between $2,400 and $2,500 to the east coast.