News / Carrier rate hikes bolster transpacific spot prices – but will they hold?

Photo: © Andrii Yalanskyi

Container spot freight rates on the transpacific this week reversed 11 consecutive weeks of decline, with price increases seen on both the Asia-US west coast and Asia-US east coast trades.

The Shanghai-Los Angeles leg of Drewry’s World Container Index (WCI) grew 8% on the previous week, to end at $2,522 per 40ft, while the Shanghai-New York leg was up 12% week on week, to finish at $3,677 per 40ft.

The rise was largely due to a round of 1 September general rate increases on Asia-US trades, ranging from $1,000 to $3,000 per 40ft, depending on the carrier.

These increases were portended by last week’s SCFI, which suggested significantly higher quotes were being offered for the week ahead, as explained by The Loadstar. However, rates are not expected to remain at those levels.

“Despite the upcoming Golden Week holiday in China, it is unlikely that these rates will be sustainable without further cuts to shipping capacity. Hence, Drewry expects rates to remain stable in the upcoming weeks,” the UK supply chain consultancy noted.

Xeneta chief analyst Peter Sand said the transpacific market was more nuanced than headline figures would suggest, with a large variation in pricing between the high and low ends of mid-market.

“The market average spot rate into the US west coast has increased 9.4% from a week ago, but there are a range of sub-plots happening within that average rate,” he explained.

For example, according to Xeneta data, the high mid-market average rate to the US west coast stands at $2,414 per 40ft, while the mid-low spot rate is $1,650.

“The drama is found in the market mid-high, which has increased 29.2% from a week ago,” said Mr Sand. “Meanwhile the market mid-low has only increased 2.2%.

“This shows how different shippers are impacted in very different ways – larger volume shippers that tend to occupy the market mid-low are still shipping goods at almost the same rate as a week ago.

“It is a different story for smaller shippers that may not have the same negotiating power or market insight to push back against increasing rates. They face a different reality, and their nervousness is seeing them pay the higher rate,” Mr Sand explained.

Indeed, this week’s SCFI showed a 14% gain on shipments to the US west coast, to $2,189 per 40ft, and and a 7% increase to the east coast, to $3,073 per 40ft, indicating that rates could strengthen for a further week.

For shippers on the other main east-west deepsea trades, it was mostly business as it has been for the past couple of months – healthy demand but falling rates, propelled by overcapacity.

The WCI’s Shanghai-Rotterdam leg lost 10% week on week, to end at $2,385 per 40ft, while the Shanghai-Genoa leg lost 7% on the previous week, to end at $2,653 per 40ft.

“Despite healthy demand and port delays in Europe, a growing surplus of vessel capacity has been pushing down spot rates on this tradelane. Therefore, Drewry predicts a further decline in spot rates in the coming weeks,” said Drewry’s commentary.

The WCI’s Rotterdam-New York leg remained unchanged for another week – it’s been mostly unchanged for a number of weeks – but during a JOC webinar this week, it was noted how the variation in rates, from North Europe to North America compared with Mediterranean-North America, had considerably widened.

While North Europe-North America spot rates have stood at around $2,000 per 40ft for months, Xeneta analyst Destine Ozuygur noted that the current average pot rate on the Mediterranean-North America trade was some $1,400 higher.

Michael Britton, head of ocean products in North America for Maersk, explained: “I think the dynamic in the Mediterranean is still very much impacted by the fact that we are not using the Suez Canal. “That has had a significant impact on the capacity that’s going through the Mediterranean, and connectivity.

“And in general, I think rates from the Med are significantly higher than they are from North Europe, and utilisation continues to be quite high.

“We’ll see how that develops, but I would suggest that’s certainly a trade where utilisation has been higher than others, and will likely continue to be since we have no intention of resuming transits through the Suez Canal, given the lack of safety in the Red Sea,” he said.