News / Surging fuel costs lift spots... for now

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The fallout from the US-Israel-Iran conflict is now beginning to bleed into the main container shipping trades as carriers begin to mitigate against soaring fuel prices.

The most affected trade was paradoxically the least affected by the conflict itself – the eastbound transpacific routes.

Today’s Shanghai Containerised Freight Index (SCFI) showed a 14.5% week-on-week jump in its Shanghai-US west coast base port leg to finish at $2,352 per 40ft, while its Shanghai-US east coast base port route was up 12% on the previous week to $3,624 per 40ft.

US west coast freight forwarder Freight Right said that transpacific freight rates climbed $400-$600 per 40ft over the past week after a series of rate increases with a rates of $2,000-$2,100 per 40ft on shipments to the west coast and said further increases were likely next month.

“Factoring in standard margins, the total cost for importers is approaching the $2,500-$2,600 range as we move into April,” it said and added that rates to the east coast had breached the $3,000 per 40ft mark this week as carriers reduced capacity.

“Rising oil prices are the primary driver behind recent rate hikes. Carriers are utilising these costs as the justification for General Rate Increases (GRIs) and new surcharges,” the forwarder said.

However, it added that North American demand remains weak, while analysts at Linerlytica claimed the rate rally would not last.

“Although SCFI transpacific rates will see another jump this week, they are not expected to stick with carriers still unable to fill up all available capacity especially on the East Coast where utilization levels have been particularly poor.

“Annual transpacific contract negotiations that have been postponed after the outbreak of the Iran war have been restarted, with initial feedback suggesting rates are mostly maintained at last year’s levels but with higher floating bunker surcharges,” it added.

This week’s World Container Index (WCI) from Drewry saw a more moderate 4% week-on-week gain on its Shanghai-Los Angeles route $2,686 per 40ft, while its Shanghai-New York leg was up 3% week-on-week to end at $3,393 per 40ft.

Meanwhile, spot rates on the Asia-Europe trades also rose this week and are now approaching levels last seen during the pre-Chinese New Year peak in mid-January.

The WCI’s Shanghai-Rotterdam leg rose 4% on the previous week to end at $2,552 per 40ft, which Drewry attributed to “ongoing tensions in the Middle East”, but carriers’ hopes that the conflict would lead to a jump in spot rates has been largely unrealised.

However, It may also be that carriers are realigning with the market in their efforts to raise rates – yesterday CMA CGM announced a new Asia-North Europe FAK [Freight All Kinds] rate of $3,500 per 40ft for implementation on 1 April, a level which is $500 less than the $4,000 per 40ft it was targeting just last week.

Today’s SCFI, which often behaves as a forward-curve for the following week’s WCI, saw a 4% increase on its Shanghai-North Europe base port route, while its Shanghai-Mediterranean route was unchanged from the week before.

However, there was a 10% week-on-week jump in the WCI’s Shanghai-Genoa leg, which finished the week at $3,474 per 40ft.

This may partly be explained by demand for east Mediterranean transhipment hubs which are expected to play a key role in supplying cargo to the Persian Gulf markets, which are now largely set to be supplied through the Saudi Red Sea port of Jeddah and accessed from the Suez Canal.

“Med rates continue to hold up better than North Europe with demand for alternative Middle East Gulf via Med hubs still holding, although the impact has been mitigated by direct Red Sea services with additional loaders still being added although most of the ships added are smaller ships of below 3,000 teu,” Linerlytica said.