China USA trade and tariffs war, © Alexlmx
© Alexlmx

Ahead of the traditional transpacific annual contract rate negotiating season, there seems no slowing of Asia-US container spot rate erosion.

The failure of ocean carriers to halt the decline by capacity management blank sailing programmes– at the same time counterintuitively heavily discounting short-term rates – has left the transpacific lines exposed to conceding huge reductions in tenders for new contracts commencing in May.

This week saw the Freightos Baltic Exchange (FBX) Asia to US west coast component shed another 4.6%, to $1,181 per 40ft, which when compared with the average FBX reading for the same week of last year of $15,898, provides a stark reminder of how far and how fast the US market has imploded.

Meanwhile, the hitherto more robust Asia to US east coast tradelane is seeing its premium spread advantage over west coast ports shrink, Drewry’s WCI US east coast reading slipping another 4% this week, to $2,881 per 40ft, for example.

Moreover, the breakeven point for Asia USEC carriers will be significantly higher than for their west coast services, due to the longer transit times consuming considerably more fuel and the high cost of Panama/Suez Canal toll fees, which have to be factored into voyage calculations.

Elsewhere, on the Asia-Europe tradelane, carriers are also seeing their previously healthy margins vanish with every round-trip voyage.

The lowest Asia-North Europe spot rate this week was recorded on Xeneta’s XSI at $1,548 per 40ft – down 5% on the previous week, 13% on the month and comparing with around $14,500 12 months ago.

However, the market is awash with offers from China-based forwarding agents offering much lower FAK rates, with a validity for shipment through to the end of March, utilising all the major carriers. A Felixstowe-based NVOCC contact told The Loadstar this week he was receiving lower rate offers “virtually every day”.

He added: “I can even pick and choose the carrier for the best transit times, and there is no longer a surcharge for UK ports. In fact, some lines will give me extra free time on the berth and will waive any demurrage on the box if I need it longer.

“I think they [carriers] are getting what they can, while they can,” he said.

And spot rates from Asia to the Mediterranean are also falling, despite the stronger market fundamentals, with, for instance, the WCI losing another 2% this week, to $2,540 per 40ft.

The container spot market outlier remains the transatlantic tradelane, with indices showing remarkable resilience in the face of a big injection of capacity and consequential reduced load factors on the headhaul North Europe to US east coast route.

The North Europe to US east coast readings for the FBX, XSI and WCI indices were virtually flat this week, at $4,992, $5,253 and $5,640 per 40ft, respectively.

“Unlike the transpacific and Asia-Europe trades, declining utilisation levels have thus far failed to have an impact on pricing in the trade, indicating that some other mechanism must also be at play in determining rate levels on this specific trade,” said Alan Murphy, CEO of Sea-Intelligence.

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  • Marc Greenberg

    February 24, 2023 at 2:35 pm

    Complete lack of discipline by the ocean liners continues to roil markets. Last year is was the complete lack of reality and a disregard for the customer or the trade that also roiled markets. It is obvious that global oversight of carrier behavior is needed to address such radical market volatility. This “get what you can when you can” attitude swings in two directions and cuts markets like a freshly sharpened knife. When does the shipping community say its enough and institute global regulation to control carrier behavior to stabilize markets. We live in a global village today and these bad actors are running free creating chaotic and undependable markets – not good for business anywhere!