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China’s Golden Week holiday appears to have marked the end of the protracted transpacific peak season, as container freight spot rates out of Asia to the US declined this week.
According to Drewry’s World Container Index (WCI), the spot rate on its Shanghai-Los Angeles route declined 3% week on week, to finish at $7,624 per 40ft, while the Shanghai-New York leg was down 2%, to $10,220 per 40ft.
US west coast forwarder Freight Right said the market had, basically, been static over the past week due to the holiday in China.
Meanwhile, spot rates on the Asia-Europe routes fell for the 13th consecutive week as contracting season gets under way, potentially putting shippers and their forwarders in a stronger negotiating position than they have seen this year.
“For European shippers, tender season is in full force, and falling short-term rates are a welcome development as they negotiate long-term contracts, because they also benchmark against the short-term market,” said Peter Sand, Xeneta’s chief analyst.
“Demand has been very strong all year, not least into Europe, but it could not keep growing at double-digits indefinitely.
“As demand eases from a very high level, the fight for capacity eases too, and even freight forwarders are now getting better deals from carriers in long-term contract negotiations,” he added.
According to this week’s XSI by Xeneta, the Far East-North Europe spot rate fell 2.5% on the previous week, to end at $3,645 per 40ft, while the XSI’s Far East-Mediterranean route was down 5.9% week on week, to end at $4,007 per 40ft.
“Spot rates on the Far East to Europe trades have fallen heavily since the post-Hormuz crisis peak in July. The Mediterranean is taking the biggest hit, down 43% since 1 July, while North Europe is down 34%,” explained Mr Sand.
In comparison, the WCI’s Shanghai-Rotterdam route fell 2%, to $3,337 per 40ft, while the Shanghai-Genoa leg was essentially flat, at $3,696 per 40ft.
The next two-to-three weeks will likely determine the course of pricing for the remainder of the year, with carriers attempting to reverse the declines by seeking higher FAK rates in the second half of October.
“However, the successful implementation of these increases remains uncertain – the faster-than-expected return to the Suez route remains the biggest threat to carrier efforts to support rates,” Drewry noted.
Mr Sand added: “The pace of the decline has eased a little, but rates are still elevated and the trend is still downward, so we are not at the floor yet.”
Speaking on an Asia-Europe webinar hosted by the Journal of Commerce yesterday, Drewry Supply Chain Advisors’ head of advisory, Chantal McRoberts, agreed that early signs from shippers now running tenders were that rates could fall further.
“We think they will soften, in terms of what we’re seeing right now – shippers that have opened up competitive tenders are seeing a variety of different strategies.
“We’re seeing some better rates than this time last year last year,” she added, but warned that price increases could come through surcharges rather than base rate levels.
“It’s the surcharges that are causing the biggest consternation – we’re seeing inflated fuel prices appear; we’re seeing some inflated pre-peak season surcharges coming in, so it’s really important that shippers put up guardrails around contract rates.
“There is scope to save some cost, but it will depend on the market, the risks, and the framework of whether it’s the right time to go to bid, or whether it’s better to try and extend.
“And it’s also whether the providers are also open to that, which is really important in terms of forwarders because they also have a role in setting the market expectation on rates as well,” Ms McRoberts said.