News / Pressure on carriers drives cut-throat freight market for China's exports

© Mr.siwabud Veerapaisarn

A parallel freight market is emerging for exports from China that undercuts the lowest container spot rates.

Asia-North Europe ocean carriers are proactively quoting small- and medium-volume shippers ‘special’ FAK rates below $1,000 per 40ft from China to the UK, as they scramble to fill their ships in the dismal market that has followed the Chinese New Year holiday.

Indeed, The Loadstar has sighted an e-mailed quote this week from a major carrier for $998 per 40ft from a range of Chinese ports to the UK port of Felixstowe, valid until 14 February.

Moreover, The Loadstar also received a no-volume commitment offer from a China-based forwarding agent down to $1,400 per 40ft from Shanghai and Ningbo to Felixstowe, and $1,450 for Hamburg and Rotterdam, valid until the middle of the month.

The forwarder claims the rates are valid with all the main Asia-North Europe carriers and they can offer prompt shipment.

A UK-based NVOCC contact told The Loadstar the forwarder would most likely enjoy a “sizeable markup” on the rates, so the base rate with the carrier would “probably be around $1,000”.

He added: “The way things are going, they might even be able to achieve lower rates than that soon, as the carriers are desperate.”

Nevertheless, the container spot market indices appear to have paused their decline with, for example, Xeneta’s XSI North Europe component almost unchanged this week, at $1,787 per 40ft.

“These indices are only as accurate as the information they are given, and some of this data is obviously being held back,” said the NVOCC contact. “And don’t forget also, that spot rate indicators are an average and therefore do not necessarily reflect the lowest rates.”

Meanwhile, on the transpacific, Drewry’s WCI Asia to US west coast reading was down 1% on the week, to $2,056 per 40ft, whereas the XSI saw a drop of 3%, to $1,529.

However, on the US east coast, the Freightos Baltic Exchange FBX reading held steady this week at $2,660 per 40ft.

And transatlantic shippers are starting to see the impact of the significant injection of extra capacity on the route, with another 5% fall in the FBX North Europe to the US east coast spot, to $4,956 per 40ft.

According to Vespucci Maritime CEO Lars Jensen, the immediate outlook for carriers is more of the same, with new rate wars looming across tradelanes.

He noted that volumes on the major deepsea trades were “either at, or below, pre-pandemic levels following the collapse which began in September”.

“This is driven by importers, especially in Europe and North America, undergoing an inventory correction,” said Mr Jensen. “All elements in the container shipping markets point to a challenging period for container carriers in 2023.”

And the analyst warned: “Not only are the fundamental elements pointing to a cyclical downturn, but competitive pressure between carriers is also poised for a temporary increase.”