News / Transpacific freight rates – it’s all about 'who blinks first'

© Larry Portmann

Container spot rates are falling – but not fast enough for transpacific shippers that walked away from what they regarded as “excessive” new rate demands from carriers for annual contract renewals at the S&P Global TPM24 conference in Long Beach, California, last week.

And the gradual erosion of the Red Sea crisis spike in container spot rates continued this week, with Drewry’s WCI composite index shedding another 4%. Nonetheless, it remains 77% higher than 12 months ago.

The WCI Asia to US west coast component slipped 4% over the course of the week, for an average of $4,082 per 40ft, while Asia-US east coast rates edged down 1%, for an average of $5,411 per 40ft.

Notwithstanding the 25% decline from their mid-January peak, US west coast and east coast spot rates remain over 100% higher than for the same week last year, against which carriers are feeling bullish about hiking their contract deals, and for now are prepared to play a waiting game before engaging in more serious negotiations.

“It’s about who blinks first,” one BCO told The Loadstar last week at TPM, adding that his company would consider the carrier offers before deciding the next course of action.

Transpacific carriers believe they can slow the rate erosion by blanking services, especially against a background of healthy demand. The port of Los Angeles this week, for example, saw a 54% year-on-year increase in container imports across its terminals from 20 vessel arrivals.

Indeed, during Israeli carrier Zim’s Q4 and full-year 2023 earnings call this week, CFO Xavier Destriau said it was “still a little too early to assume or to say where we will land on contract volume, and also the prevailing rates”.

Elsewhere, and in contrast, on the Asia-Europe tradelanes, demand is weak, with reports to The Loadstar suggesting that short-term rates for key customer accounts are ‘normalising’ to pre-Red Sea crisis levels, with Cape diversion surcharges being watered down.

Nevertheless, for smaller Asia-Europe shippers, container spot rates are still around twice as high as back in mid-December, before the start of vessels being rerouted around Africa.

Xeneta’s XSI Asia-North Europe spot reading declined 5% in the past week, to an average of $3,758 per 40ft, compared with an average of $1,462 in mid-December.

Meanwhile, spot rates on the Asia-Mediterranean tradelane, which has been the most impacted by ships no longer transiting the Suez Canal, are falling sharply. The Freightos Baltic Exchange (FBX) spot reading slumped 10% over the past week, for an average of $4,479 per 40ft, but it is still approximately 90% higher than a year ago.

And on the transatlantic, carriers are just about holding onto the recent GRIs that saw rates recover to breakeven levels, mainly thanks to lines replacing deployed tonnage with smaller ships.

In fact, this week’s XSI North Europe to US east coast spot reading held steady, at an average of $2,013 per 40ft.