Container rates on the benchmark trans-Pacific were essentially unchanged in the latest week as freight volumes fell on most major trade routes, testing carriers’ plans for general rate increases.
Rates from Asia to U.S. West Coast ports were stable at $1,700 per forty foot equivalent unit (FEU) and $2,700 per FEU to East Coast ports, according to the Freightos Baltic Index for the week ending August 29.
”Daily rates to start this week, though, jumped up $400- $500 per FEU on both lanes, possibly reflecting carrier attempts at introducing September GRIs (general rate increases,” wrote Judah Levine, head of research for Freightos (NASDAQ: CRGO). “Demand, space and rate trends of the last few weeks suggest it will be difficult for carriers to push these rate bumps through, though more blanked sailings are being announced as Golden Week approaches.”
Golden Week, Oct. 1-8, is a public holiday in China and a slack period for shipping.
It’s a time-honored practice among shippers not to honor signed contracts, particularly when spot rates fall below those contract rates. Similarly, carriers may announce rate increases and surcharges, but it’s usually a test of the market to see whether those changes will stick.
Mediterranean Shipping Co. has already announced six blank (cancelled or rescheduled) sailings on Asia-Europe services around that week, including three for the week of Sept. 22-28. Observers say that could indicate an early end to the peak shipping season on that trade.
SONAR’s index of booked TEUs inbound to U.S. ports showed ocean volumes narrowly up .17% this past week, but down 9.35% from July and 17.97% from the same period a year ago. A notable exception is Vietnam, where volumes are ahead 4.88% y/y.
“Even if successful though, those higher rate levels would be well below the West Coast peak season level of $7,000- $8,000 per FEU seen last year,” Levine wrote. “Those rates would also still be lower than at any point last year, with the slow season low for the year at about $3,000 per FEU in April 2024.
”These year-on-year comparisons, with Red Sea diversions still in place, likely point to growing overcapacity already putting downward pressure on rates.”
Most major carriers have written off the Red Sea-Suez Canal route for this year. After Israel last week killed the Houthi prime minister in Yemen, the rebels launched an unsuccessful attack on a tanker in the northern Red Sea, an indication that the region remains too volatile for most scheduled services.
Asia-North Europe rates continue to soften from the peak season level of $3,400 per FEU in July and into August, according to Freightos. Rates fell 7% to $2,841 per FEU last week, with Asia-Mediterranean prices down 2% to about $3,000 per FEU.
“That these rates are also beneath the year lows for 2024 when Red Sea diversions were attributed with causing the highly elevated price baseline, likewise suggests fleet growth is contributing to overall lower rates year on year, even as carriers continue to order more ships,” wrote Levine.
Find more articles by Stuart Chirls here.
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