Asia-US rates climb as N.Europe-US prices slide

N.Europe-US prices slide
The rate rebound on the Asia-US trade lanes and Asia-North Europe corridors contrasts with the rapid slide of spot prices on the Trans-Atlantic fronthaul trade from North Europe to the US East Coast. Photo from A.P. Moller-Maersk
  • Asia-US container rates continue to rise going into the peak season as Europe-US prices drop
  • Drewry’s WCI composite index says rates rose on the traditional Asia-US and Asia-N. Europe lanes on August 17, but prices are still 82% below the $10,377 peak in 2021
  • Xeneta tells shippers to make the most of the transatlantic rate dive before the carriers can act to shore up the spot market

Containerized freight rates from Asia to the US West Coast and East Coast continued to rise this past week, raising hopes that the market will strengthen further going into the peak season. In contrast, N.Europe-US prices slide, according to Xeneta.

Drewry said its composite World Container Index increased 2.3% to US$1,832.48 per 40-foot (FEU) container on August 17, some 82% below the peak of $10,377 in September 2021 and 32% lower than the 10-year average of $2,683.

That level indicates a return to more normal prices, but is still 29% higher than the average 2019 pre-pandemic rates of around $1,420.

Drewry said the average composite index for the year-to-date is $1,773/FEU, which is $910 lower than the 10-year average.

The Freightos Baltic Index registered greater increases, based on its own pricing structure that includes other add-on fees which other indices exclude. On August 15, rates for Asia-US West Coast rose 14% to $1,908/FEU while its Asia-US East Coast prices climbed 9% to $2,912/FEU.

Asia-Northern Europe prices on the index gained 8% to $1,789/FEU while already high Asia-Mediterranean prices rose a further 3% to $2,404/FEU.

The strong rate rebound on the Asia-North America trade lanes as well as on the Asia-Mediterranean and Asia-North Europe corridors contrasted with the rapid slide of spot prices on the Trans-Atlantic fronthaul trade from North Europe to the US East Coast.

Xeneta chief analyst Peter Sand said in a blog a “transatlantic spot rate meltdown” had put shippers back in charge of the market. He advised them to seize the moment before carriers act to halt the rate slide.

“Don’t wait around – jump on those deals while you can. Just like we’ve seen with fronthauls from Asia to the US and EU, carriers will be dead set on boosting the transatlantic spot market once again. They’re not keen on bleeding cash in yet another trade. You must stay on your toes and constantly monitor rates to know when to go to market.”

Sand said the North Europe-US East Coast trade lane suddenly became the “poster boy” of the container freight market in 2022, as it “defied gravity with elevated rates for a long time after the rest of the market had crumbled.”

“It now finds itself in a spot rate meltdown, with the monthly average for a 40-foot standard container crashing from $5,298 excluding terminal handling charges in January to just $809 on average in August. That is a whopping fall of 85% and a serious loss-maker for carriers,” Sand said.

He said shippers on the trade are taking full advantage of this new reality, regaining the upper hand after the pandemic delivered dramatically high freight rates.

Sand said Xeneta data shows the strongest are now paying less than $475/FEU for spot business, an all-time low. Also, there are significantly fewer long-term contracts coming into force in 2023 than in past years, indicating that shippers are turned off by the rates carriers offer.

Digging into the N.Europe-US price slide, Sand cited, firstly, the absence of demand. He said transport volumes on the trade were down 13.6% H1 2022, with April volume alone diving 23% year on year, as reflected by a spot-market slide from $3,875/FEU at the end of March to $2,450/ FEU by May 1.

The second quarter was worse than the first, and Xeneta expects demand to fall short of 2022 in each month in the second half as well.

Sand said that, secondly, carriers have used this trade lane as a “parking lot” for excess capacity not deployed on other lanes. Sea-Intelligence data he cited show capacity on the N. Europe-N.America East Coast trade grew 23.6% in H1 2023 versus 2022 (and by more than 30% just in February and April).

Meanwhile, across the transpacific, transatlantic and Asia-North Europe & Med trades, 32 cancelled sailings have been announced between weeks 33 (August 14-20) and week 37 (September 11-17), out of a total of 665 scheduled sailings. The number represents a 5% cancellation rate, Drewry said.

Drewy said 50% of the blank sailings will occur in the Transpacific Eastbound route, 19% on Asia-North Europe and Med, and 31% on the Transatlantic Westbound trade.

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