News / Return of downward pressure on container spot freight rates

ID 28999784 | Big © Xuejingwen | Dreamstime.com

Container spot freight rates on the main east-west trades were largely flat this week, after shippers and forwarders absorbed last week’s steep climbs, with both Asia-Europe and Asia-North America trades showing little pricing movement.

Analysts at freight rate benchmarking platform Xeneta said the flattening of rates this week appeared to indicate the recent tariff pause-induced freight rate rally seen on the transpacific trades had reached its peak.

“Flatter market mid-high and a narrowing spread with market mid-low suggests a spot rate spike following the lowering of US-China tariffs in May is now reaching a peak.

“Offered capacity mid-June on the transpacific trade is up 28%, compared with mid-May – and continuing to trend upwards – as carriers respond to cargo rush following lowering of tariffs. Increased capacity further supports [our] forecast of spot rates reaching a peak in June,” it said.

According to Xeneta data, at the end of May, the spread between mid-high rates and mid-low rates was just $250. But by 1 June, this had ballooned to $2,506.

Yesterday, however, it had fallen to $1,000, mostly driven by an increase in mid-low spot rates.

Source: Xeneta (click to expand)

“A narrowing of the market mid-high and mid-low in Xeneta data indicates the fear and uncertainty that drove spot rates upwards in the wake of the 90-day lowering of US-China tariffs is now easing,” said Xeneta chief analyst Peter Sand.

“Xeneta has previously stated we expected spot rates to peak in June before downward pressure returns, and this is how it is playing out,” he added.

Today’s reading of Xeneta’s XSI average spot rate index stood at $5,270 per 40ft on its Far East-US west coast leg, a 3% gain on the week before; while Drewry’s World Container Index (WCI) grew 1% week on week, to $5,914 per 40ft, on the Shanghai-Los Angeles leg.

Meanwhile, today’s Shanghai Containerised Freight Index (SCFI) recorded a 26% week-on-week decline on its Shanghai-US west coast base port leg, to $4,120 per 40ft, losing $1,500 in a single week, which could indicate falling spot rates on the trade next week.

However, on Sunday, 15 June, a new series of general rate increases (GRIs) of $1,000-$3,000 per 40ft are set to take effect, amount depending on the carrier, on the transpacific, which could push spot rates up once more and confound this week’s predictions.

The WCI’s Shanghai-New York leg gained 2% week on week, to $7,285 per 40ft.

In contrast, there was little movement on Asia-Europe pricing, with both the WCI’s Shanghai-Rotterdam and Shanghai-Genoa legs unchanged at $2,837 per 40ft and $4,054 per 40ft respectively.

A source in Ningbo suggested that demand and capacity remained balanced on the Asia-North Europe trades, while overcapacity on Asia-Mediterranean routes could start to become a factor.

“The tight capacity on the North European route has not yet eased, the shipping pace remains good, and the freight rates continue to rise.

“The capacity level of the Mediterranean route is relatively high, and carriers had to undersell their spaces to canvass more shipping orders,” he said.