Lines target Transpacific rate gains ahead of contracting season

1/9/2018

Recent spot rate declines on Transpacific ocean trades are only likely to be recovered ahead of Chinese New Year, according to Neil Dekker, a consultant with ClipperMaritime-London.

As reported in Lloyd’s Loading List, the eastbound Asia to North America ocean freight market has continued its six-year run of strong demand growthbut freight rates on the headhaul Transpacific trade still dropped to yearly lows earlier this month.

Dekker said the most recent General Rate Increases by lines in mid-December had provided relatively little traction, with rates out of Asia to the US East Coast (USEC) and US West Coast (USWC) lifting only by about $100-150 per feu - gains likely to be eroded, prompting rates to “drift back down to $1,700-$1,800 to USEC and $1,000-$1,100 levels” to USWC.

“For the immediate future, Chinese New Year falls much later [in 2018 compared to 2017] on 16 February and there could well be a ramp up of volumes prior to this time which may lift rates back to around $1600-1700 per feu to USWC and $2500 per feu to USEC – the kind of levels lines will want moving onto the next contract negotiation period,” he said. 

“As an example, Hapag-Lloyd has announced a $700 per feu GRI from January 15, indicating this will align with a cargo spike.”

One factor in the decline of Transpacific spot rates in late 2017 was the failure of lines to remove service strings as part of a systematic winter deployment programme as in most previous years. “It is too late to do this now and lines will focus on adjusting capacity via void sailings,” said Dekker. “This will be done in earnest as the Chinese holidays commence.

“There are also other competitive factors ahead for 2018 which will continue to sway pricing dynamics – another prospective USWC string from SM Line, PIL moving much larger ships into the trade and the 2M lines wary of what the other big two alliances are doing.”

Dekker also predicted more large container ships would be cascaded into the Transpacific trades as lines took delivery of newbuildings during 2018.

“Do not underestimate the power of what one or two carriers can do in the market should they choose to be aggressive, and in any case there are more players in this trade than in the Asia-Europe route, for example,” he added.