Shock for carriers as spot rates fall below long-term contract prices
Spot container freight rates on the main east-west deepsea headhaul trades continued to edge downwards ...
There was a slight uptick in spot rates between Asia and Europe and a marginal decline in rates on the transpacific, according to Friday’s Shanghai Containerised Freight Index (SCFI).
The Asia-North Europe component of the SCFI was up by 3.6% on the week before, to $866 per teu, and for Mediterranean ports, there was an increase of 1.2% to $827 per teu.
This compares with a SCFI reading of 12 months ago which recorded a plunge in spot rates to $271 and $409 per teu for North Europe and the Mediterranean, respectively.
Meanwhile, spot rates between Asia and the US edged down last week by 1.3% for the west coast, to $1,357 per 40ft, and by 3.1% for US east coast ports to $2,360 per 40ft.
A year ago, the SCFI reading for the transpacificsaw the US west coast spot rate at $770 and the east coast at $1,648 per 40ft.
Crowdsourced data from the Xeneta freight rate benchmarking platform shows annual contracts being signed to run from 1 May, between Asia and the USWC, are being fixed at an average of $2,000 per 40ft – almost double the rate of a year ago, and higher than estimated by many at the recent TPM event in Long Beach.
Indeed, for both the major tradelanes there is no evidence, so far, of a repeat of the extreme volatility in spot container freight rates seen last year, which proved to be a major disrupter for the industry and the root cause of heavy first-half losses for liner shipping companies.
Then there were many reports that Asia-North Europe contracts were being torn up as shippers were enticed by aggressive carriers to jump ship for cheaper rates. But this year, so far, there seems little appetite among carriers for a fresh bout of discounting.
Anecdotal reports coming into The Loadstar suggest that the carriers are showing much greater discipline in their rate strategies, no doubt helped by reports of space shortages as the new alliance networks continue to bed in.
Xeneta’s chief business development officer and co-founder, Thomas Sorbo, said carriers were “continuing to push up rates on all routes” and noted: “There seems to be less competition in the market when it comes to rates.”
Away from the two big tradelanes, carriers have also succeeded in driving up rates on secondary routes. For example, spot rates from Asia to West Africa have surged to $1,915 per teu, compared with a year ago when they stood at around $850.
The increase on the Asia-South America east coast has been even more dramatic. The SCFI recorded another big jump of $293 per teu for Santos spot rates last week to $2,540, compared with just $730 in the same week of 2016. Moreover, backhaul voyages between North Europe and Asia are still enjoying massive revenue gains as ships continue to run full and carriers are able to dictate the market.
Together, the leap in spot rates and the consequential influence on longer-term contract rate agreements should convert into much improved earnings for carriers this year – if they are able to sustain the gains into the peak season and beyond.