Ocean freight rates stable ahead of summer peak season
Ocean freight rates are relatively stable and slot availability seems ample on front haul container trades ahead of the summer peak season. However, there are mixed expectations on whether spot rates could soon rise on key trades, including China-Europe, and rising fuel costs are also set to become a factor.
The World Container Index, assessed by Drewry, fell 1.1% this week and languishes 6.6% lower than a year ago. Rates from Shanghai to New York decreased by $10 to reach $2,462 per FEU, while rates from Shanghai to Los Angeles dropped to $1,358, a change of $39 per TEU.
Digital container freight platform Freightos also said that transpacific headhaul rates remained soft, with CEO and founder Zvi Schreiber noting that “despite recent speculation, it’s premature to talk of ocean freights recovering”.
He added: “Rates for China East Asia to North America West Coast and also to the East Coast continue to lag year on year. In fact, last week was the 37th straight week of year-on-year lags for both lanes. And while it’s true that most lanes’ rates are marginally up when compared with 2016, that was the year when ocean freight rates choked.
“Given current dynamics, I don’t anticipate that there will be any significant increases lasting more than one week until we get to peak season.”
Freightos said the Global Container Index shed one percentage point this week to fall from $1,268/FEU to $1,261, driven by the Transpacific where China/East Asia to North America West Coast rates dropped 4%, and China/East Asia to East Coast rates declined 2%.
However, not all analysts view container shipping’s main trades through a bearish lens. Freight forwarder Flexport reported yesterday that space was “tight” and “steady” on Asia-US West Coast and Asia-US East Coast services. The planned 15 May General Rate Increases (GRIs) have now been postponed on both transpacific headhaul trades, but new GRIs have been announced by lines starting 31May.
Analysts also differed on their respective readings of freight activity on Asia-Europe headhaul services. Drewry said yesterday that Shanghai-Genoa and Shanghai-Rotterdam rates had both dropped 1% week-on-week and were now 10% and 18% lower, respectively, than a year ago.
But Flexport said it had seen signs that the Asia-Europe freight market was tightening. “Rates started to noticeably increase beginning on May 1with the partial implementations of the GRI,” it said in a market update last night. “Space is open, but there have been a number of disruptions and omissions due to weather.”
Elsewhere, Flexport said Europe-US West Coast and Europe-US East Coast services were both seeing “steady” rates with the potential to increase over the week ahead. It told shippers to book around two weeks in advance for both trades, adding that GRIs had been announced by lines for 1 July.
Flexport also said exports from the US west coast were surging as shippers prepared for trade restrictions.
“California ports experienced a 13-month high for exports to Asia. Los Angeles and Long Beach, the biggest US West Coast ports, reported that loaded container exports increased 12% year-over-year in April from a year ago,” said Flexport.
It cited an international trade economist based in California who said anxiety was driving the export trade because of uncertainties and concerns about possible new tariffs, adding: “Shippers want to get their goods on the high seas and to their final destinations before the gates close on US exports.”
As reported in Lloyd’s Loading List, rising fuel costs also set to become a factor. For example, Mediterranean Shipping Co (MSC) is imposing a bunker surcharge due to a sharp jump in fuel prices, which are up more than 30% this year, and almost 70% since last June.
With crude oil today hovering around $80 a barrel — the highest since 2014 — it said the situation was “no longer sustainable without emergency action”. MSC’s worldwide emergency bunker surcharge applies to all ocean and land-based cargo carriage with immediately but is only temporary.
And as reported today in Lloyd’s Loading List, container shipping executives have begun calling for the supply chain to share the burden of rising fuel costs, which is otherwise set to deliver the container shipping sector with an economic hit of the value of $10 billion. Carriers say there is little scope for further deceleration of vessel speeds – which are seen as the ‘last resort’ for lines.