News / Boom time 'just a memory' as rates tumble before Golden Week holiday

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Container freight rates from China remain on the slide ahead of the Golden Week national holiday early next month.

Rates are falling due to weak demand during a period which should see a spike in bookings before the week-long factory shutdown.

Indeed, reports from China suggest sailings this week to North Europe and the US have seen utilisation levels drop to 80% on some export loaders, prompting carriers to urgently ramp up their blanking programmes through to the middle of October.

Xeneta’s XSI Asia-North Europe component shed 4% this week, for an average of $1,525 per 40ft, a level now 80% lower than a year ago.

“Unless they blank a lot more sailings, I can see rates falling really fast as demand is just not there this year,” a director of a UK-based NVOCC told The Loadstar.

“We’ve already seen rates kicking around in Chinese forwarding circles of below $1,000, but we think these are probably not supported and are companies chancing their arm and gambling that rates will collapse,” he added.

Moreover, on the hitherto more robust Asia-Mediterranean tradelane, there are signs that this market is also now being impacted by weaker demand.

And in response to the expected “lower demand” over the Golden Week period, MSC advised this week it had cancelled three consecutive sailings of its standalone Asia-Mediterranean Dragon service, to include week 41, beginning 9 October.

On the transpacific, carriers have been aggressively blanking Asia-US west coast sailings in order to support their 1 September GRIs and, in some cases, peak season surcharges (PSSs). For example, Hapag-Lloyd announced a PSS from today on Asia to North America of $600 per 40ft.

It remains to be seen whether the GRIs and PSSs will stick, but there was little sign of an impact in this week’s spot indices.

For instance, Drewry’s WCI Asia to US west coast spot was down 1% this week, for an average rate of $2,217 per 40ft, with its Asia-US east coast reading flat, at $3,438 per 40ft.

Meanwhile, transatlantic carriers are clearly in trouble: the Freightos Baltic Index (FBX) North Europe to US east coast spot has now sunk to $1,217 per 40ft, which compares with an average rate a year ago of around $9,000.

Meanwhile, the long-term contract rates carriers rely on for 50% or more of their business, continue to head south. Xeneta’s index for contracted rates fell another 7.8% in August, and has now dropped 63% in the past 12 months.

“It’s a torrid time for carriers in the contract market, with continuing weak demand exacerbated by burgeoning overcapacity as more new ships come on line,” said Xeneta’s chief analyst, Peter Sand.

“This is driving down the industry’s prized long-term rates, with falls across the board when we assess region by region. The boom period of just one year ago must now seem like a very distant memory,” he added.