News / Container spot rates up out of Asia, but backhaul rates falling at last

28/04/2017

Container spot rates between Asia and Europe and Asia and the US surged this week on the back of new rate increases and worsening congestion at Chinese ports.

Rates to North Europe, as recorded by the Shanghai Containerized Freight Index (SCFI) leapt 16% to $1,021 per teu, ahead of 1 May FAK (freight all kinds) rate hikes by carriers.

And for Mediterranean ports, the percentage increase was even higher, at 20%, taking the spot rate to $1,011 per teu.

Meanwhile transpacific carriers appear to have succeeded in pushing spot rates back up, as the crucial last rounds of new annual contracts are concluded.

This week’s SCFI recorded a massive 21% jump in spot rates between Asia and the US west coast to $1,606 per 40ft, while on the east coast, rates were up by almost 14% to $2,625 per 40ft.

The robustness of spot rates to the US west coast suggests that the start of new independent transpacific services in early April, by South Korean carriers Hyundai Merchant Marine (HMM) and recently launched SM Lines, has so far not had an impact on prices on the tradelane.

Container lines plying the Asia-North Europe route have, over the past two years, increased the percentage of spot cargo carried, compared with contract business, to more than 50% in the case of some carriers, but this might be about to change dramatically.

According to a report to The Loadstar from a UK forwarder with a significant involvement in the Chinese market, “spot pricing is currently not an option”.

The forwarder said that the majority of carriers had advised that shippers must either have a long-term contract rate agreed or they will have to pay the current FAK rates.

They added that in addition to refusing spot business, carriers were also unwilling to enter into negotiations for contract business with shippers without evidence of regular volumes having moved previously.

However, on the backhaul lane from North Europe to Asia, the situation for shippers seems to be easing. Shippers on the route have suffered from months of capacity shortages to Asia and the Middle East and rates that have shot up in leaps and bounds.

The Loadstar has been told by many shippers that carriers have been accepting export bookings at one rate, but refusing to ship the containers until a “surcharge” was accepted.

According to crowd-sourced data from freight rate benchmarking platform Xeneta, backhaul rates to Asia this week were recorded 17% higher than headhaul rates – a situation that is practically unprecedented. Xeneta is showing the current market average rate for the route at $1,919 per 40ft – a phenomenal increase of 279% on rates of a year ago.

Nevertheless, speaking to The Loadstar today, Thomas Sorbo, chief business development officer and co-founder of Xeneta, said: “We expect this peak in eastbound rates to begin to drop in the very near future.”

Mr Sorbo said there were already signs of a reduction in rate data being input, but warned “the market remains unpredictable and we must remain cautious”.

Xeneta’s predictions of a “normalisation” of eastbound rates are backed by a UK forwarding source who emailed The Loadstar today to say that, contrary to media reports, its rates to Asia were in “a complete downward spiral”, having been cut by some $1,000 per 40ft in the past two weeks.