Further declines on East-West ocean spot freight rates

8/15/2017

East-west ocean freight spot rates suffered marginal declines last week, reflecting further softening following early August losses for lines, according to the latest figures from the Shanghai Containerized Freight Index (SCFI). However, spot freight rates on key lanes still remain far ahead of 2016 levels.

Average spot prices on the Asia-North Europe trade fell 0.4% in the week ended 11 August, and were also down 1.2% on the Asia-Mediterranean trade at $849 per TEU.

Average box spot rates on the US East Coast trade from Shanghai decreased 1.5% to $2,620/FEU, while to the US West Coast they slipped 1.2% to $1,641/FEU. This despite multiple reports suggesting that volumes from Asia into the US are now at record levels, although it is worth noting that most boxes shipped on Transpacific lanes are moved under long-term freight contracts rather than the spot market.

Year-on-year analysis of SCFI figures also revealed that last week's average spot prices on the Asia-North Europe and Mediterranean trades were higher by 20.8% and 21.5% per TEU, respectively, when compared to the corresponding week in 2016.

Spot rates for a 40 ft container shipped to the US East Coast and West Coast from Shanghai on August 11 were up by 48.2% and 34.9% year-on-year, respectively.

The market context going back 12 months is significantly different to the current one. Despite reports of improved utilisation levels, the first two weeks of August 2016 brought double-digit weekly declines in Asia-Europe ocean freight spot-rates with carriers failing to hold prices above the $1,000 /TEU level initially achieved through 1 August general rate increases (GRIs).

A year on, the pricing environment is far more stable, not least due to liner consolidation and the new alliance system. For example, two weeks ago GRIs pushed up rates by 4.8% on the Asia-North Europe trade to $963/TEU. Today, prices are just 3.3% lower, SCFI figures show.

As for the Asia-US trades, the 1 August 2017 hikes lifted US East Coast and West Coast rates by 20% and 37%, respectively, to $2,685/FEU and $1,687/FEU. A fortnight later, they have only shed only 2.4% and 2.7% after those initial gains.

The latest World Container Index assessed by Drewry and published last week also highlighted slight rate erosion ranging from 1.1% to 2.8% on the previous week on the major container trades.

Drewry expects rates to stabilise this week as space gets tight on vessels leaving Asia because of the upcoming peak season.