News / Smooth sailing for rates on the transpacific, but rougher seas for Asia-Europe

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As expected, container spot rates have soared between Asia and the US this week, buoyed by GRIs and radical capacity cuts by carriers.

The Shanghai Containerized Freight Index (SCFI) recorded a massive 24.5% leap in spot rates for the US west coast, to $1,720 per 40ft.

For US east coast ports, rates jumped 16%, to $2,789 per 40 ft.

According to Alphaliner, the Ocean Alliance will have removed over 29,000 teu of capacity during July by withdrawing three headhaul voyages.

At the same time, container lines have hit their customers with GRIs of $400 or more from 1 July, and some will impose a PSS (peak season surcharge) of $1,000 per 40ft from the middle of the month.

Moreover, Hapag-Lloyd advised its customers this week of a further $700 per 40ft hike from 1 August.

OOCL attributed the “expected low seasonal demand” as the reason for the blanking of the three Ocean Alliance loops in July, but the radical capacity reduction appears to have significantly pushed rates up.

Shippers are also concerned about the threat of more tariffs being imposed on Chinese imports, should this weekend’s G20 Osaka summit sideline trade discussions between the US and China not go well. And they are on alert to front-load containers in order to beat the start date of any new duty hike.

And to add to the uncertainty for transpacific shippers, the ‘game-changing’ IMO 2020 low-sulphur regulations are apparently also causing sleepless nights for American companies that import their stock.

A story in Reuters this week focuses on the impact of the 0.5% sulphur cap on bunker fuel, coming into force on 1 January, could have on inventories.

US home furnishings behemoth RC Willey told the press agency it had escalated the delivery of some 450 containers from the planned shipment in September and October to July and August, to “avoid any disruption” to trade from the switchover by ships to low-sulphur fuel.

Elsewhere, all recent FAK uplift attempts by Asia-Europe carriers have failed, prompting container lines to take the unusual step of cancelling headhaul sailings during the peak season.

CMA CGM advised yesterday that its FAL1 loop vessel ,scheduled to sail from China on 21 July, would be blanked, as well as its FAL3 loop service from Shanghai on 10 August.

Meanwhile, the SCFI reading for North Europe slipped again this week, losing 2.1% to $701 per teu. And, worryingly for carriers, it is now 21% below its level a year ago. Rates to Mediterranean ports edged down slightly on the week, to $726 per teu, around 20% lower than the same week of a year ago.

Notwithstanding that the spot market now accounts for over 50% of the traffic moved on the transpac and Asia-Europe tradelanes, long-term contract rates, as recorded by ocean freight benchmarking firm Xeneta, are a vital check on the underlying health of the market.

In its XSI Public Indices report for June, the Oslo-based company reports a “calmer month for the container industry”, with a “slight decline of 1.7% in global rates” after a “mad May”, which saw a spike of 11.5% in its crowd-sourced rates data.

Xeneta chief executive Patrik Berglund said that, against the backdrop of geopolitical uncertainty, the outlook remained “too complex to call”.