Spot rates surge again as carriers push through fresh July hikes
A series of container freight spot rate hikes and general rate increases implemented on 15 ...
Photo: VesselFinder
Container freight spot rates this week declined across most of the main east-west trades, as the market recovered from the shocks from the Hormuz crisis and weak demand conspired with stable capacity.
The declines meant the composite rate of the World Container Index (WCI), produced by Drewry, dropped for the first time in six weeks – a rise that had coincided with launch of US and Israel attacks on Iran.
The WCI’s Shanghai-Rotterdam leg dropped 3% week on week, to end at $2,229 per 40ft, while its Shanghai-Genoa route was down 2% on the previous week, to finish at $3.343 per 40ft, and freight forwarders operating on the Europe-Asia trades told The Loadstar almost all carriers were offering discounts by the end of the week.
“[Rates are] very weak,” one forwarder told The Loadstar.
“We have seen reductions from the carriers – some were more hesitant than others to start, but all have joined in, in offering general reductions across FAK/spot,” they said, adding that carriers were using spot rate discounts as a way of protecting revenues – “due to the costs and current implications of bunkering”.
Meanwhile, they added, European demand for Asian goods for the remainder of April and into May was beginning to look problematic for carriers.
“We are seeing a decline in demand in some areas, and I am hearing from sources that some retailers are slowing down production and waiting to see how the Middle East situation ‘pans out’.
“However, I’m not sure how long they will be able to wait,” they said.
Unlike the demand boost seen during the pandemic, carriers hoping the Iran conflict might induce a demand boom are likely to be disappointed, Drewry Supply China Advisors director Chantal McRoberts told The Loadstar for a forthcoming podcast, and confirmed that rising rates seen in recent weeks were largely due to fuel surcharges.
Source: Drewry
“This is a very different situation to Covid. This is not a boost growth scenario. This is quite the opposite, actually.
“Recently we’ve seen spot rates surge because they’re looked at on an all-in basis. Post-ceasefire, bunker prices fell 9% in terms of relative to the rates, but rates rose 1%.
“This week, we’ve seen Asia-Europe and the transpacific both falling about 3%, probably driven by falling fuel prices, but it also demonstrates that demand is really soft, particularly on Asia-Europe.
“The demand just isn’t there, and we still have the issue of excess capacity on those tradelanes,” she added.
According to Linerlytica, structural capacity on the Asia-North Europe has grown by 3%, due to the launch of CMA CGM’s standalone Japan-North Europe OCR service; while on the Asia-Mediterranean trade, it is up 10%, due to addition of Gemini’s SE4/AE19 and MSC’s Phoenix services.
No forwarders canvassed by The Loadstar reported any issues acquiring either space or equipment in Asia.
On the transpacific trades, the WCI’s Shanghai-Los Angeles and Shanghai-New York legs both declined 3%, to end at $2,810 and $3,552 per 40ft respectively.
However, US west coast freight forwarder Freight Right said that, while standard FAK spot rate levels had largely stayed level on shipments to both the US east and east coast this week – at $2,600 and $3,600 per 40ft, respectively – some shippers had been able to reduce freight costs through “blended rates” being offered to the west coast .
“These blended rates, often originating from fixed agent contracts, can bring costs down to approximately $2,100-$2,200 for the west coast, depending on the carrier and volume ratios. For example, a carrier may require one container at full FAK price for every four containers shipped at a discounted contract rate,” it said.
In contrast, on Asia-Europe routes, however, a rather aggressive blanked sailing programme is looming on the transpacific, “defending current price floors rather than allowing a slide back to previous lows”. But it could also support a series of peak season surcharges (PSSs) planned for the beginning of May.
“Nine blanked sailings have been announced on the transpacific for next week to maintain capacity,” Drewry noted.
“A few carriers have announced a PSS of around $2,000 per 40ft from 1 May [and] Drewry expects freight rates to remain less volatile in the coming weeks, before the implementation,” it said.
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