News / GRIs trigger Asia-Europe spot rate jump, but can carriers hold the line?

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Asia-Europe ocean carriers this week managed to lift container spot rates ahead of the annual contract season.

However, it remains to be seen whether lines scrapping for market share have enough discipline to hold onto their GRI (general rate increase) gains against a backdrop of weak demand and a chronic oversupply of capacity.

Indeed, a contact at a UK-based importer of bulk commodities from China told The Loadstar this week two of his carriers had already discounted rates from mid-November, down to an average of $600 per teu.

Meanwhile, all the published spot indices show big percentage jumps in their North Europe components over the past week: for example, Xeneta’s XSI recording a huge 38% uplift, for an average of $1,326 per 40ft, suggesting carriers have been able to obtain a significant chunk of their minimum circa-$1,800 FAK (freight all kinds) November GRIs.

The gains, albeit coming from a sub-economic base, will be a good negotiating tool for Asia-North Europe carriers starting new contract negotiations – providing the indices continue to trend upwards.

And for the Asia-Mediterranean tradelane, which has also come under intense rate pressure recently following the injection of extra capacity, there was further good news for the serving lines this week, with, for instance, the Freightos Baltic Index (FBX) average spot showing a 13% increase, to $1,551 per 40ft.

On the transpacific, Asia-US west coast rates continued climbing, on the back of the Panama Canal draught restrictions affecting Asia-US east coast vessel utilisation levels and the confidence stemming from the signing of a new long-term west coast labour agreement.

Drewry’s WCI Asia-US west coast reading this week recorded another 5% gain, for an average $2,287 per 40ft, and is now tracking 1% higher than for the same week of 2022. And although the WCI Asia to US east coast average spot rate was up 2% on the week, to $2,661 per 40ft, average rates on the route are still 50% below a year ago.

Transatlantic carriers are, arguably, under the most pressure from sub-economic rates and there are rumours circulating of service suspensions on the route over the winter period.

The FBX North Europe-US east coast component shed a further 2% this week, to take the average spot rate down to $1,019 per 40ft, which is an eye-watering 90% lower than 12 months ago.

In their disappointing third-quarter results, ocean carriers have constantly predicated a bleak outlook for the liner industry next year unless demand improves and rates increase above their current sub-economic levels.

“Container demand is expected to be under downward pressure with no encouraging sign of restoring desire for consumption,” said South Korea’s HMM. While Taiwan’s Yang Ming said today the “issue of a supply-demand imbalance persists”.

“A significant gap between supply and demand growth rates will remain in 2024, presenting an operational challenge that international shipping companies will need to address,” said Yang Ming.