Europe-China box rates surge

3/10/2020

Ocean freight spot prices from Rotterdam to Shanghai have risen 24% in the past week to reach $786 per feu, 45% higher compared to same period last year, as lines prioritise the repositioning of empty containers in preparation for outbound demand from China, new figures from Drewry indicate.

According to figures today from the World Container Index, assessed by Drewry, Drewry’s composite World Container Index, combining major east-west container trades, has continued its overall downward trajectory since the first week of February, due to the outbreak of Coronavirus in China and other parts of the world. The composite index decreased 3.5% this week, although it was 3.1% up when compared with same period of 2019. The average composite index of the WCI, assessed by Drewry for year-to-date, is $1,688 per 40ft container, which is $304 higher than the five-year average of $1,384 per 40ft container.

While most trades saw single-digit percentage price movements this week, spot rates from Rotterdam to Shanghai surged 24% to reach $786 per feu – 45% higher compared to same period previous year. This huge increase is the effect of empties repo prioritization. However, freight rates declined by 10% on the Shanghai to Los Angeles trade lane, dropping to an average of $1,327 for a 40ft box.

Meanwhile, transatlantic rates “do not seem to have any major changes and have remained steady”, Drewry noted.

Drewry said it did not expect any significant upturn in rates until the epidemic can be brought under control.

Freight digitalisation specialist Freightos said the coronavirus outbreak “continues to be profoundly disruptive to the global supply chain, especially for importers heavily reliant on Chinese manufacturing”, although this week has seen “definite steps towards normal”.

It noted that its latest analysis of China-US container rates was “heavily impacted by production’s slow recovery” in China, highlighting that “China-US West Coast prices rose by 2% since last week to $1,331/FEU. Rates are 13% behind last year’s prices for this week.”

China-US East Coast prices fell by 1% to $2550/FEU, although this rate trails last year’s by 7%.

Freightos continued: “Chinese manufacturing took definite steps towards normal this week as quarantine periods in many areas came to an end and travel restrictions were eased. The vast majority of factories are back online, with many operating at as much as 80% capacity. Inter-province trucking, which last week was a major pain point, has also benefited from these developments and is now operating at about 80% capacity as well.”

Freightos CMO Eytan Buchman said nearly all major ports in China were coming back to life, highlighting that port call data from maritime analytics and insights specialist Windward indicate that while activity levels at Chinese ports had the Chinese New Year lull extended by two weeks compared to 2019, the trend is clearly toward a resumption of activity.

“But given flagging manufacturing and transport to ports, demand for transpacific ocean freight remains low,” he noted. “Carriers have buoyed rates since the start of the shutdown by cancelling ships – though the relatively few blank sailings this week could also be a sign of recovery.”

He continued: “The record cancellation of sailings since the shutdown has backhaul rates on many lanes already starting to climb. These blankings also mean that whenever production does pick up, capacity will likely be tight not only because there will be fewer ships but also because many empty containers have been stranded outside of China. Rate increases announced for April 1 show that carriers expect a slow March followed by a strong April and beyond.” 

He said the ripple effects of the shutdown were already being felt from South Korea to the US, adding: “A sample of surveyed Freightos.com marketplace users show that for many US SMB (small and medium business) importers from China, the shutdown has already had a negative impact on inventory (78%) and bottom lines (66%). 

“How disruptive and expensive the comeback will be for US importers will depend on how quickly production and ports clear the backlog.”