News / Have spot rates reached their peak? 'We're not out of the woods yet'

There are tentative signs that soaring container spot rates may be coming to an end – early data this week suggests pricing may be beginning to level off.

Data released yesterday by Xeneta indicated that average spot rates from the Far East to the US East Coast increased 3.7% on 15 July, to $10,045 per feu, and spot rates into the US West Coast rose 2%, to stand at $8,045 per feu.

“While this means spot rates are up almost 150% on these trades since the end of April, the latest increases are far smaller compared with 1 July, when those rates rose 22% and 12%, respectively,” said the crowd-sourced analytics platform.

Over recent months, increases in spot rates have largely been staggered, and we have typically seen large hikes either at the beginning of the month or midway, responding to carrier FAK increases and new surcharges.

But this week the market did not respond in that way, suggesting it may be near its peak.

Chris Higgins, commercial director at AFS Global, told The Loadstar: “We are starting to see the increases in rates reduce to a few hundred dollars between fortnightly filings, rather than, say, the $1,700 per feu jump we saw from 31 May to 1 June with one of the carriers.”

Another forwarder added: “Yes, we are starting to see spot rates level out for August. While costs remain elevated, the increases in spot rates are getting smaller, suggesting that rates are nearing their peak and could begin to ease.

“However, nothing in the numbers yet indicates that the tide has turned.”

Sources indicated carrier customers may have cause for optimism, as forward booking times have reduced from four weeks ahead of schedule to three weeks, “likely due to the extra capacity coming in”.

Xeneta senior shipping analyst Emily Stausbøll said a spot rate peak could be a sign of growing available capacity.

“Shippers can again start to play carriers off against each other, instead of feeling they need to pay whatever price they are offered to secure space,” she said.

“As the balance of negotiating power starts to swing back towards shippers, we should see spot rates start to come back down.”

But Mr Higgins urged: “Before we start to see rates reduce and the balance of power become more evenly distributed between shippers and carriers, a number of supply side factors need to come into play, alongside a softening in the recent high demand.

“The alliances are still operating on reduced capacity, due to the longer schedules, and although some loop gaps are being filled with smaller vessels, this reduced capacity will still mean that rates remain high,” he explained.

And signs of a spot market peak “does not mean an end to [shippers] troubles”, added Ms Stausboll. “Perhaps the market has reached a peak, but shippers are still paying hugely elevated costs.”

According to Xeneta data, spot rates remain up on mid-December by just under 400% from the Far East to the USWC, by more than 300% into the USEC and by 455% into North Europe.

Mr Higgins added: “We may be approaching the peak of the challenges but, with the longer transit times, increasing congestion at EU ports, with Rotterdam currently suffering the most, and with empty equipment still slow to return to China, we are not out of the woods yet.”

One forwarder predicted: “We might see a slight reduction in freight rates around mid-August, circa $1,000, with local shippers putting a lot of pressure on carriers to try to keep supply chains workable for Christmas loads. Then it will depend on how quickly importers rush to load early for Christmas, perceiving the reduction as a discount or not.

“Things are really in the balance rate-wise at the moment.”