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Carriers Unveil New FAK Hikes in Bid to Halt Asia-Europe Rates Slide

The Loadstar
Total Views: 858
April 5, 2024

By Gavin van Marle (The Loadstar) –

Container spot freight rates on the main deepsea east-west trades continued their gentle descent over the course of this week, despite the ongoing vessel diversions from possible Houthi attacks in the Red Sea region.

There are, however, trade pockets where rates have shot up.

Forwarders report, for example, that with air freight capacity out of Colombo constrained, an uptick in shipping rates from Colombo to Dubai – where air cargo connections to Europe are plentiful – had increased 62% in a little more than a month.

“There is a big pick-up in sea-air ex-Colombo. We have seen significant increases in FCL bookings of sea-air from a number of well-known forwarders. This has also resulted in sea freight rates Colombo/Jebel Ali increasing proportionally, and going up every two weeks.

“40ft rates CMB/DXB have increased from $800 to $1,300 in one month; we are hiking twice a month with around $200/40ft each hike,” one told The Loadstar.

Freight rate platform Freightos said this week: “Ocean rates that had climbed sharply at the beginning of the year on Red Sea diversions and lunar new year demand may be reaching their new diversion-adjusted floor.

“Decreases from January/February peaks on the impacted ex-Asia lanes have slowed in recent weeks, and recent rate announcements by some carriers suggest they are hoping to keep rates at the $3,000-$3,500 per 40ft level to Europe, and $3,500-$4,300 level to the Mediterranean this month.”

The three main spot freight indices – Freightos’ FBX, Drewry’s WCI and the Xeneta XSI – recorded Asia-North Europe rates in that bracket: Xeneta saw Asia-North Europe rates climb 1% week on week, to finish at $3,341 per 40ft; while Freightos saw it climb 2%, to $3,258.

Drewry, however, recorded a 3% week-on-week decline, to $3,078, although it remains 101% higher year on year.

In an attempt to halt the slide, Hapag-Lloyd yesterday announced a new FAK [freight all kinds] rate of $3,000 per 40ft on Asia-North Europe from 15 April, while CMA CGM today announced an FAK of $4,000 per 40ft on the trade, to be applied on the same date.

Hapag-Lloyd will apply an FAK rate of $3,700 per 40ft to West Mediterranean ports, and $4,100 to Black Sea destinations, also from 15 April, while CMA CGM will hike its rates to $4,200 and $4,400, respectively.

MSC is also set to introduce new FAK rates to Mediterranean and Black Sea on that date, although by a far more ambitious $4,800 per 40ft on Asia-West Mediterranean shipments, and $5,100 to Black Sea ports.

The increases are also likely to be linked to the rising cost of fuel. This week, Zim introduced a new bunker adjustment factor (BAF) charge on Asia-Mediterranean shipments of $718 per teu, some three times higher than on any of its other trades, as a result of “our temporary measures to reroute our vessels, given the Houthis attacks on vessels in the Red Sea”.

Transpacific spot freight rates saw a similar pattern: Xeneta recorded a 4.2% slip on Asia-US west coast shipments, to $3,474 per 40ft; while Drewry recorded a 3% decline, to $3,704. Drewry also recorded a 3% decline in Asia-US east coast services, to 4,894 per 40ft.

As contract negotiations between carriers and North American customers are under way, it will be interesting to see how much effect current spot rate levels have on contract levels when they are signed, and how much pricing remains an issue.

As US maritime analyst John McCown wrote last week: “Both the prevalence and credibility of spot rates are misunderstood.

“While there is an information content in the level and trend of spot rates, they always need to be analysed in the context of what is occurring with the more-important contract rates,” he said.

The Loadstar is known at the highest levels of logistics and supply chain management as one of the best sources of influential analysis and commentary.

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