News / Shock as new Asia-N Europe FAK rate dwarfs weak spot market

© Mr.siwabud Veerapaisarn

MSC has announced a new FAK (freight all kinds) rate from Asia to North Europe for 15 December of $2,050 per 40ft, which is at least double the level on offer in the current spot market.

Container spot rates between Asia and North Europe have lost a third of their value already this month, with, for example, Drewry’s WCI North Europe component declining another 6% in the past seven days, for an average of $1,148 per 40ft.

Moreover, carriers’ pricing via their online platforms has fallen to some $800 per 40ft for shipments ex-Chinese ports to Rotterdam, Hamburg and Felixstowe, valid until the first week of January.

Some of MSC’s peers, including Hapag-Lloyd and CMA CGM, have proposed new Asia-North Europe 40ft FAK rates of around $1,800 from 1 December, which were effectively re-sets of their failed 1 November general rate increases (GRIs).

Meanwhile, on the Asia-Mediterranean tradelane, MSC is also attempting a significant rate restoration with a new FAK rate of $2,450 per 40ft for west Mediterranean ports, effective 15 December.

Spot rates on the route, which have hitherto been more resilient than North European freight rates, have come under pressure in the past few weeks, with, for instance, the Freightos Baltic Index (FBX) component down 5% this week, to an average of $1,487 per 40ft.

In order to support their December GRIs, which carriers are desperate to see stick, ahead of new contract negotiations, the lines appear to be rolling cargo for bookings they regard as sub-economic, despite having agreed the low rates.

A UK-based NVOCC suggested to The Loadstar this week he thought the carriers were “having a reality check”, adding: “We didn’t ask for the cheaper rate, they gave it to us, and now they are obviously having second thoughts and messing about with our bookings.”

And another shipper contact told The Loadstar that rate volatility was causing much more administration work for his organisation.

“The constant up and down is stressing me out,” he said.

Indeed, in a Flexport freight market presentation this week, the advice for shippers using the Asia-North Europe tradelane included a recommendation that they “don’t trust the proforma schedules and allow some buffer in your planning”. And, to protect themselves further, they should “procure FAK rates with multiple carriers”.

Meanwhile, on the transpacific, Xeneta’s spot rate reading for Asia to the US west coast reflected a 7.5% decline on the week, for an average of $1,756 per 40ft, while the FBX Asia-US east coast spot fell by 2%, to $2,383 per 40ft.

US west coast spot rates remain on a par with the same week of 2022, but in contrast, rates to the US east coast are some 45% lower.

Asia to USEC loops on the all-water route via the Panama Canal are said to be limiting container weights to six tons per teu, due to draught restrictions on the waterway, resulting in more traffic being routed via US west coast ports.

And finally, transatlantic voyage results have become unsustainable, due to stubbornly low freight rates. The XSI North Europe to US east coast spot slipped another 2.5% this week, to an average of $1,260 per 40ft, although ‘market’ rates are said by forwarder contacts to be “below $1,000”.