News / Container spot rates still rising – but demand looks set to soften

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Container spot rates on the transpacific and Asia-Europe trades posted double-digit increases this week on the back of new FAK rate levels, peak season surcharges, and tighter capacity.

This week’s World Container Index (WCI) from Drewry recorded an 11% week-on-week increase on the Shanghai-Rotterdam leg, to end at $2,413 per 40ft, while the Shanghai-Genoa route was up 20% on the previous week, to finish $3,701 per 40ft.

“The Asia-Europe peak season is expected to start earlier than usual, as higher cargo bookings, tight vessel space, and disruptions linked to the US/Israel-Iran conflict are prompting shippers to move cargo earlier.

“As demand is rebounding, Drewry expects rates to increase further in the coming week,” the analyst said.

Carriers are certainly preparing to introduce more price rises in a couple of weeks, with MSC notifying customers this week of new FAK (freight all kinds) rates of $4,700 per 40ft to North Europe and $5,500 for both East and West Mediterranean destinations on 1 June.

However, market reaction was mixed on how successful further increases will be.

One UK forwarder told The Loadstar they “have been hearing the carriers are expecting a peak season – some are talking June, some July”.

However, they questioned whether demand could support higher spot rates.

“All carriers are looking for GRIs from mid-May. We have noticed an uplift in volumes, however nothing significant for the current levels of GRI to stick at these initial published levels, and I expect reductions,” one said, adding that threats of rollovers at Asian loading ports had yet to materialise.

“We have seen rolling lists issued, but only on the smaller Premier Alliance vessels heading into Southampton, and we have not experienced issues with getting the shipments loaded on board.”

However, capacity on both trades this week was down 5% on last week, according to data from freight rate benchmarking platform Xeneta.

According to Xeneta chief analyst Peter Sand, while Asia-Europe spot rates continue to hover at levels similar to the outbreak of the Iran conflict, transpacific spot rates are up 50% on pre-war levels, which he described as a “plateau”, and argued they would decline as the annual contracting season on the trade draws to a close.

However, this week’s WCI shows transpacific spot rates also showing strong gains, with its Shanghai-Los Angeles route up 10% week on week, to $3,357 per 40ft, while the Shanghai-New York leg increased 14%, to $4,252 per 40ft, which Drewry attributed to “the implementation of emergency fuel and peak season surcharges by carriers”, while also keeping capacity in check – seven blanked sailings have been announced on the transpacific next week.

Mr Sand said: “One factor behind the short-term market plateau on the transpacific is US shippers delaying signing new long-term contracts, due to the uncertainty caused by the Middle East crisis and the risk of locking-in rates for the next 12 months at a higher level than necessary.

“For every delayed contract, more containers must be moved on the spot market, and carriers will charge a premium – but for shippers, the short-term pain is worth it if they ultimately secure lower long-term rates in the coming weeks.

“As new long-term contracts are finalised and come into force, volumes will shift back to contracted rates and that should translate into a softening of the short-term market.

“This will be gradual softening rather than a dramatic fall off a cliff edge to pre-conflict levels, particularly ahead of the traditional peak season build-up later in the summer,” he added.