News / Container spot market: up or down ahead of late peak season?

© Suzyhamilton

The jury is still out on whether there will be a peak season this year – and also if ocean freight rates are heading north or south.

The verdict on the first count looks likely to be ‘yes’, but subdued and later than normal.

But, if container shipping analysts are anything to go by, the jury is split on the second question.

“The container shipping market is in a state of flux and is harder to forecast than previously,” said maritime consultant Drewry.

“Over the past year, spot container freight rates have continuously dropped from the Covid-related crazy levels of 2021 to mid-2022, and appeared to have found a floor,” said the consultancy.

However, GRIs, failed GRIs, reports of ‘green shoots’, soft demand and a lack of visibility on purchase orders have confused the market, meaning that spot indices appear to head in different directions from week to week.

Indeed, Drewry’s WCI composite index shows an annual decline of 79%, and was down 5% last week after two flat weeks, but the reading could easily bounce back again this week.

Carriers obviously want to talk-up freight rates, but perhaps a surprise to some is that shippers are also uncomfortable with freight rate volatility.

This was evident at the Multimodal show in Birmingham, UK, last week, when shippers and forwarders told The Loadstar spoke to indicated that, in addition to customer service improvements, from their carrier partners, they wanted more clarity on FAK rate levels and durations.

Drewry has endeavoured to get a feel from its customer base of which direction the market is heading and, at the end of May, the consultant conducted a survey, asking spot market shippers what level of rates they were expecting to achieve in June and July.

The results of the poll were shared on LinkedIn, via the Drewry Freight Loop platform, and may be welcome news for carriers that are seeing voyage results plunge into the red on several routes.

Drewry reported: “Buyers expect further reductions in spot rates in June, particularly on the transatlantic route, and either stability or moderate rate increases in July.”

For example, on the Asia-North Europe, Shanghai to Rotterdam corridor, the survey recorded May actuals at $1,847 per 40ft, a June outlook of $1,495, before recovery in July to $1,542.

On the transpacific Asia to US west coast tradelane, the data from the poll recorded May actuals from Shanghai to Los Angeles at $1,799 per 40ft, falling to $1,698 in June, before rebounding in July to $1,778.

The per feu rates include terminal handling charges at both origin and destination ports, as well as fuel surcharges.

Elsewhere, however, S&P Global Platts container freight weekly commentary is not so encouraging for the container lines.

“Despite carriers’ desire to increase freight rates as the peak season approaches – which typically leads to an uptick in spot rates – the current situation is actually the opposite,” it said of the Asia-North Europe market situation, noting that carriers were being obliged to discount rates to maintain market share.