News / Rates rocket on Asia-US east coast SCFI leg while pricing on European routes flattens

New York Terminal Photo: Mandritoiu | Dreamstime.com

Container spot rates between Asia and the US west and east coasts continued on a bull run this week supported by healthy vessel load factors in the lead up to Chinese New Year, which begins on 28 January.

The Asia to US components of the Shanghai Containerized Freight Index (SCFI) increased this week by 6.2% to US west coast ports to $2,211 per 40 ft, but leapt by a massive $461, or 14.7%, to $3,594 per 40 ft for east coast ports.

This compares to the SCFI from the same week a year ago which recorded spot rates of $1,417 per 40 ft on the west coast and $2,457 for east coast ports.

According to the latest Global Port Tracker report, compiled from data from 13 US west and east coast ports, January is forecast to see a 5.7% rise in container throughput, compared to the same month in 2016, to 1.57m teu.

This follows a provisional total figure of 18.8m teu achieved through these same US ports last year, representing a 2.9% increase on 2015.

However, the Global Port Tracker’s forecast for February container throughput at US ports is for a reduction of 1.5% year-on-year to 1.52m teu – although CNY in 2016 began on 8 February.

Meanwhile, spot rates between Asia and Europe remained virtually unchanged on the week at $1,086 per teu for North Europe and $1,028 per teu for Mediterranean ports.

Again, if one contrasts today’s index with the same week of 2016, Asia-Europe carriers have also started the year in a much healthier position than they began last year.

The SCFI reading for 12 months ago recorded Asia-North Europe spot rates at $740 per teu and Mediterranean rates at $869, having collapsed in the week by 21% and 15% respectively, and more intense downward pressure was to come.

“At the moment it looks like a seller’s market,” commented Patrik Berglund, chief executive of container rate benchmarking platform, Xeneta.

He argued that if container lines hold firm “then customers will eventually have to accept higher rates”.

However, Mr Berglund warned that the continued structural overcapacity in the liner trades could put carriers in a weak position if demand softens as a consequence of an economic shock, for example, creating “huge competition for business”.

“So, it only takes one or two carriers to drop rates and chase market share and, lo and behold, prices fall again and the volatility will return,” he said.

Despite this caveat Mr Berglund agreed the situation has improved for carriers, but advised that they, as well as shippers, “should stay on their toes”.

According to Mr Berglund there is evidence that it is not only Asia-Europe carriers, but also shippers, that are currently reluctant to go to the contract negotiating table, although for different reasons.

The carriers are happy to delay contract rate discussions until they see the first signs of the upward trend of spot rates running out of steam – which could be just ahead of the CNY – while Mr Berglund said that many shippers “are uncertain of where they stand” and are “stalling coming to the table”.