Ocean freight prices rebounding after post-peak dip

Spot rates showing signs of recovery with several lanes seeing freight rates surpassing their levels in November, due to changes on both the supply and demand side – notably higher fuel surcharges ahead of IMO 2020.

Ocean freight spot prices are showing signs of rebounding following a post-peak dip, with several lanes seeing freight rates surpassing their November highs, due to changes on both the supply and demand side. 

Based on data from the Freightos Baltic Index, digital rates specialist Freightos highlighted a number of factors behind the recent recovery in prices, notably higher bunker surcharges to compensate lines for higher fuel costs ahead of the introduction of new global low-sulphur fuel rules next year, noting: “Chief among supply drivers is the start of low sulphur fuel oil (LSFO) or scrubber installation costs being passed on to shippers ahead of the 1 January IMO fuel regulations roll out. The approaching close of Asia-EU long term contract negotiations is also causing some carriers to reduce capacity and push up spot prices, while scrubber installations are also accounting for some of the depleted supply.”

Eytan Buchman, CMO at Freightos, added: “On the demand side, advance ordering in anticipation of the early Chinese New Year (January 25) is already pushing prices up and should continue to do so well into mid-December.”

He highlighted rises in transpacific prices. According to the Freightos Baltic Index, China-US West Coast prices “shot up 13% since last week, reaching $1,507/FEU. Prices are 27% behind last year’s rate, but 39% higher than 2017’s prices for the same week,” the company noted.

Meanwhile, China-US East Coast prices are up a more moderate 8% from last week to $2,823/FEU, “surpassing its peak season high. This gain closes the gap with last year to just a 16% drop, but represents a 53% gain on the same week in 2017,” Freightos noted.

Other indicators well a broadly similar story. The composite Shanghai Containerised Freight Index rose 3.7% last week, following a 7.1% rise the previous week. Asia-Europe rates were up $34 per teu, or 4.4%, to $800 per teu, while on the transpacific, Asia-US west coast rates added to the previous week’s 14.5% rise with a further 7.4% increase, taking spot rates to $1,509 per feu, Lloyd’s List reported.

And Drewry’s World Container Index also saw rising rates, with the average composite index for the year to date standing $1,415 per feu, $18 higher than the five-year average of $1,397 per feu. But rates are still 29% lower when compared with the previous year, when front loading led to a surge in demand, Lloyd’s List noted.

Source: Lloyd’s