Spot Rate Surge to Continue Post-Golden Week

By Gavin van Marle (The Loadstar) –

Since the 1 July implementation of a series of peak season surcharges (PSS) and new FAK (freight all kinds) levels, the largest east-west container trades have seen a week of double-digit spot freight rate increases.

After several weeks in which most of the focus was on soaring spot rates on the Asia-Europe trades, this week it was the turn of the Asia-North America trades to post the largest increases.

Drewry’s World Container Index reading for its Shanghai-Los Angeles leg grew 12%, to finish at $7,472 per 40ft, while Xeneta’s XSI’s Asia-US west coast leg recorded a rate of $7,648 per 40ft.

Meanwhile, the WCI’s Shanghai-New York leg grew 17%, to end the week at $9,158 per 40ft, and the XSI tracked a similar trend to $1,146 per 40ft.

The WCI’s Shanghai-Rotterdam leg also saw double-digit growth, rising 10% to reach $8,056 per 40ft, with the XSI’s Far East-North Europe growing a similar amount, recording a rate of $7,897 per 40ft yesterday.

However, it is also clear that many forwarders and shippers are paying well above the quoted indexed rates in order to secure space in an increasingly strong demand environment, a situation that – on Asia-Europe trades at least – is now beginning to impact major box shippers with significant amounts of contracted volumes.

Freight forwarders in Europe this week told The Loadstar major shippers were being forced to pay space guarantee surcharges on at least a part of their volumes.

“Importers and big BCOs are now beginning to see the effect, with space getting ever tighter,” one forwarder said.

“Even if their carrier has maintained its full commitment in terms of volumes – every carrier is down 30% to 40%, in terms of space – so from the middle of July, retailers that were on contracts are now having to accept $3,000-$4,000 increases on a least a portion of their boxes to get them loaded.

“Some of the multinationals are buffered, but we are now talking to all sorts of importers that previously wouldn’t give us the time of day; now they are calling us to see if we have any loading options – and it’s almost accepted that higher rates are here and paying them is the only way to get cargo onboard vessels.

“This will remain elevated until Golden Week,” he added, which appeared to be a common consensus this week.

Another said that spot rates on Asia-North Europe had already breached $10,000 for many customers, and claimed the elevated pricing would continue until China’s Golden Week holiday, which begins on 1 October – and could even persist until the second quarter of next year.

“I think this is an early peak season, but I also believe this will continue to Golden Week – after speaking with customers they are mindful of the current challenges and do not want to be in a situation where they have no stock for Christmas, and are forecasting strong orders until at least then.

“Should the peak last that long, there is only four-to-six weeks before we start to ramp up for the peak just before Chinese New Year, so realistically the market will not start to come down significantly until Q2 next year, even with extra capacity coming in,” he said.

Another believed there could well be a further 50% increase between now and Golden Week.

“Demand in July and August is quite strong, so we are predicting that a ceiling of $15,000 is not unrealistic,” he said adding that there was very little vessel space for at least the next month.

“We are now booking four weeks ahead for some retailers and it’s the soonest we can do. If a booking is released, 9 August is the first ship I can get onto.”

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