News / Transatlantic trade bucks rate decline trend - but not over strike fears

While container spot freight rates have continued to decline in recent weeks on the main east-west trades, the transatlantic trade has once more bucked the trend, with a sudden upswing in pricing.

The rate for shipping a 40ft container from North Europe to the North America east coast have generally hovered around the $1,900 mark for the best part of this year, down from a peak of $2,158 per 40ft at the beginning of February, according to the Xeneta XSI index, at the beginning of September they rose back to $2,220 per 40ft.

Similarly, according to last week’s Drewry World Container Index (WCI), its Rotterdam-New York leg was the only trade to see prices increases, with a 16% week-on-week rise to $2,212 per 40ft.

In the context of the threat of a port shutdown looming over the US east and Gulf coast, there was some speculation that the price increases might have been due to European shippers looking to beat the 1 October deadline, when members of the International Longshoremen’s Association (ILA) have vowed to commence strike action if a new contract is not signed with the USMX employers’ body.

Indeed, MSC has advised a near-tripling of FAK rates from October 1 via an Emergency Operations Surcharge.

However, Xeneta chief analyst Peter Sand told The Loadstar that the main reason behind the latest price rises was the successful implementation of peak season surcharges by transatlantic carriers at the beginning of September.

“Transatlantic shippers could easily be spooked by the strike which almost certainly will hit them hard in two weeks – but I would argue they aren’t, at least not to a massive extent,” he said.

“Demand isn’t very strong, and capacity matches it with room to spare.

“This jump in North Europe to US east coast should be seen as a successful hike of rates from carrier initiatives more than shippers fighting over scarce capacity.

“Meanwhile, in early July we saw a jump on Med to USEC, so a part of this is also ‘catching up’ and levelling the spread, and it’s also worthwhile noticing that the jump in rates in the XSI-C is only narrowly above the early February peak,” he explained.

Whether the peak season surcharges (PSS) were entirely successful depends on your perspective – although the early September increase on the trade amounted to around $300, carriers had aimed for far more.

Hapag-Lloyd’s 1 September transatlantic PSS was for $800 per 40ft and $600 per 20ft, while MSC imposed a PSS of $1,000 per 40ft and $800 per 20ft, and CMA CGM applied a $250 per 20ft and $500 per 40ft rate restoration initiative on the same day.

Meanwhile, Maersk also introduced a $1,000 per container PSS on Europe-Canada shipments on 1 September, and the same quantum on US east coast shipments on 9 September, which has yet to show up in the indices.

“So, drama yes, but no despair amongst shippers,” Mr Sand said, adding that Xeneta’s current assessment on the possibility of industrial action in the US was that it would last a week.

“We believe a strike will hit US east and Gulf coasts and will last up to seven days before government intervention will conclude it.

“The ripple effects will harm shippers and rates will go higher as a result,” he said.

That is certainly likely to be the case for MSC’s customers, who have been advised by the carrier of new transatlantic FAK rates to be introduced on 1 October, with an Emergency Operations Surcharge.

For example, on Antwerp-New York shipments, the new FAK is set at $6,000 per 40ft, a near-tripling from today’s spot rate.