News / A gasp of delight for ocean carriers as spot rates surge at 2016's last gasp

The last Shanghai Containerized Freight Index (SCFI) of the year gave container lines more optimism for 2017 after a dreadful 12 months of trading.

All the SCFI’s main tradelanes registered impressive spot rate gains as the index published on 30 December leapt 15.5%.

Rates from Shanghai to North European ports increased 11.3%, to $1,168 per teu, and for Mediterranean ports, rates were up 12.8% to $1,086 per teu.

Anecdotal reports suggest demand is strong prior to the Chinese new year holiday, which commences on 28 January – particularly good news for carriers in their negotiations with shippers for annual contract rates.

One UK manager at a major carrier told The Loadstar it had declined to respond to some Asia-North Europe tenders where it knew rates were being touted below $1,000 per teu. He said that, given the current robust market, the company’s strategy was “to take a higher ratio of spot traffic, at least until the Chinese new year”.

There was also good news for transpacific carriers: the SCFI component for Asia to the US west coast surged 24.8% to take the spot rate to $1,923 per 40ft, while for the US east coast, the rate jumped 18.6% on the week to $3,100 per 40ft.

Negotiations for transpacific tradelane contract rates normally do not start until March/April for commencement in May, but if the market remains firm after the CNY, then there could be a clamour from shippers to tie down their yearly rate agreements earlier.

Other notable increases in spot rates for the final SCFI of 2016 included a massive 61% jump in rates to Santos (to $2,828 per teu), a 39% leap in rates to Durban (to $1,116 per teu) and a healthy 23.9% increase in rates to West Africa, to $1,786 per teu.

It goes without saying that increases of this magnitude in spot rates at a time when rates are normally under pressure, will give ocean carriers, and their shareholders, a boost in confidence. Nevertheless, the critical period will be post-CNY when demand reduces and carriers are again forced to chase cargo to fill their ships.

In this respect, all the current four vessel-sharing alliances have announced plans to blank sailings during this period.