Spot price indices hit new highs as Asia-Europe route approaches $6,000 per teu, with further rises expected this month.
CONTAINER freight spot rates to Europe ex-Asia have continued their relentless rise, with rates now closing in on $6,000 per teu for Shanghai-northern Europe volumes – and much higher in reality, with further surcharges and premiums required in the current market to get any kind of guarantee that the container will move.
For the third week in a row, freight rates on the spot market to both northern Europe and the Mediterranean reported by the Shanghai Shipping Exchange have sat at over $10,000 per feu, and the 4.2% and 5.2% increases, respectively, will put yet more pressure on shippers. The Shanghai Containerised Freight Index rose another 1.8% last week as a decline in transpacific rates to the US west coast mitigated rises elsewhere.
Drewry’s World Container Index also saw a 2%, or $121 increase last week and now stands at nearly 300% above where it was this time in the past year. The average composite index of the WCI, year-to-date, is $5,243 per feu, $3,348 higher than the five-year average of $1,895 per feu.
In its latest Ocean Freight Market Update, freight forwarder Flexport highlighted that Asia-Europe (Far East Westbound – FEWB) services were still experiencing an “extremely serious space crunch and equipment shortage across the entire FEWB trade, caused by high demand, too many blank sailings or reduced capacity, and insufficient equipment repositioning following schedule delays”.
It noted that carriers “are building up backlog, restricting new booking acceptance and rolling more cargo. These trends are expected to intensify through May and June with additional delays across the board”.
Further rises in June
Following a general rate increased (GRI) on 15 May “by all carriers”, it expects a 1 June GRI will lead to further rate increases being implemented by all carriers.
On the Asia-North America (Transpacific Eastbound – TPEB), it reports a similar picture of high demand and short capacity, with “no slowdown in sight”, adding: “The market continues to heat up even further as demand remains strong and blank sailings remove capacity across all TPEB lanes.”
It said Southeast Asia and North China remain the hardest hit origin region for equipment shortages and growing backlogs of bookings, adding: “Bookings out of China base ports have continued to increase as more shippers turn to flexible routing options in order to secure equipment. Rail congestion remains an issue at destination, drawing out transit times on IPI routings.”
Describing space as “extremely tight”, it said the capacity and equipment situation was characterised by “extreme shortages in North China, Southeast Asia, and Taiwan”. Flexport expects a further GRI in the first half of June that will lead to further rate increases being implemented by all carriers.
Indeed, one carrier, Hapag-Lloyd, has announced a $3,000 per feu GRI on Asia to North America services from 15 June.
Meanwhile, one freight forwarder anecdotally told Lloyd’s Loading List last week that Hapag-Lloyd informed it on 25 May that it had cancelled all the forwarder’s FEWB bookings for June.
Contract price rises
As highlighted last week, it is not just spot prices that are seeing strong increases.
Xeneta’s Long-Term XSI Public Indices now stands 34.5% higher than it did at the start of 2021, after rising another 9% in May.
All major trade corridors have seen rates growth, “and much of it spectacular” across the first five months, with Far East export and European imports leading the way — both up by more than 50%.
Xeneta chief executive Patrik Berglund said it was a development that “delivers pain and profit in equal measure” to those on opposing sides of the carrier-shipper divide.
“Every month we see a new set of results from the carriers demonstrating their strength,” he said.
“After years of fluctuating fortunes, the carriers are determined to seize on current opportunity, manoeuvring to exploit huge consumer demand and increased online retail with new strategic moves.”
He cited German carrier Hapag-Lloyd’s plan to implement a $3,000 per feu general rate increase on Asia-US trades from mid-June.
“With fundamentals so much in their favour, there is a good chance they will achieve some level of implementation,” Mr Berglund said.
But the lack of equipment and port congestion had squeezed supply chains, leaving shippers stressed and facing increasingly one-sided negotiations.
“Even when contracts are signed, there is the potential of rolled cargoes and broken agreements as operators take advantage of massively lucrative spot rates,” he said.
“It is difficult to see the prospect of any immediate rates relief on the horizon.”
That would likely not happen until the pandemic had further eased and more equipment and capacity became available, he added. In the short term, carriers would continue to hold the cards.
“It will be interesting to see how the market reacts to try and redress the balance, with the recent arrival of CULines — supported by purchasing association XSTAFF — showing the potential for alternative solutions to the main carriers,” he said.
Intra-Asia operator CULines started doing ad hoc sailings to Europe earlier this year but from June will boost its monthly service to a two-week service to Antwerp, Rotterdam and Hamburg, using 4,200 teu vessels.
“Under pre-pandemic market circumstances it would not be economically feasible to compete against 20,000 teu vessels with 4,200 teu vessels,” said Vespucci Maritime chief executive Lars Jensen.
“CULines provides an example of just how extreme the current market is.”
A version of this article was originally published last week in Lloyd’s List
Source: Lloyd´s
