News / Spot rates ex-China set to hit five figures – high street prices will rise, warning

© Mr.siwabud Veerapaisarn

There were further double-digit increases in container spot freight rates this week, after a series of general rate increases and other surcharges came into effect on 1 June, a day or two after last week’s indices were published.

Drewry’s World Container Index (WCI) recorded week-on-weeks gains of 14%, 17% and 11% on its Shanghai-Rotterdam, Shanghai-Genoa and Shanghai-Los Angeles routes, respectively.

Its reading for the Asia-North Europe leg stood at $6,032 per 40ft, while Xeneta’s spot rate XSI index for the same route gained 18.5%, to reach $5,647 per 40ft.

The spot rate on the WCI’s Shanghai-Genoa route reached $6,664 per 40ft.

The WCI’s Shanghai-Los Angeles leg stood at $5,975 per 40ft, while the Shanghai-New York spot rate grew 6%, to $7,214 per 40ft.

The XSI’s transpacific route recorded a growth of 19.5%, to reach $5,859 per 40ft.

“Drewry expects freight rates ex-China to continue rising next week, due to the onset of the early peak season,” the analyst said.

And European freight forwarders are warning that spot rates from Asia would breach the five-figure mark next month. One told The Loadstar: “As anticipated, spot rates from 1 July are breaching the $10,000 per 40ft barrier, and several carriers’ online pricing platforms already reflect this.”

According to a report by the BBC this week, the spot rate surge is beginning to bleed through into retail prices on the high street, driving them up.

Whether spot rates remain at this elevated level will most likely depend on how long demand persists.

“If the demand increase is the early start of the peak season, we can expect demand-side pressure to subside in a few months, and earlier than usual,” said Freightos head analyst Judah Levine.

“Just as rates climbed on a combination of pre-lunar new year demand, and restricted capacity in the first months of the diversions and subsided once demand eased, prices and disruptions should decrease when peak season slows this time as well, although until Red Sea traffic resumes, we can expect rates to fall no lower than their April floor,” he added.

In contrast to the ex-Asia routes, the transatlantic headhaul Rotterdam-New York spot rate declined 4% week on week on the WCI, ending the week at $2,136 per 40ft.

Meanwhile, the growing scarcity of equipment at Asian export hubs has led to a container price bubble, according to box trading platform Container xChange.

It said average container prices for 40ft high-cube units in key Chinese ports rose 45% last month, from $2,240 in April to $3,250. Prices for similar units were around $1,698 in November, but $7,178 in September 2021, at the height of the Covid boom.

Container xChange founder and CEO Christian Roeloffs said the causes of higher container prices were the same as those that had propelled the recent spot freight rate surge, and added they could fall just as quickly.

“As we monitor the market closely, it’s evident that the current spike in container prices is not sustainable in the long term, as it is not backed by strong underlying demand.

“Concerns over labour markets and high interest rates imply that consumers are likely to reduce spending, which could lead to a decline in demand for goods and, consequently, a reduction in shipping volumes in the near term – unless the demand revival becomes stronger and the supply capacity soak-up intensifies.

“As the initial rush to restock inventories subsides and the real demand from consumers and businesses remains flat, we anticipate a stabilisation of, or even a decline in, container prices in the mid-term; the market is showing signs of volatility driven by short-term factors, rather than a sustained increase in demand,” he added.