- Container spot rates, which surged due to the Red Sea disruption, face potential adjustments as the Chinese New Year approaches.
- The 45-day period from December 15, 2023, to January 31, 2024, witnessed a significant increase in the World Composite Index.
- As festivities begin, container spot rates show signs of cooling off, prompting industry watchers to anticipate a right-sizing of the surge.
Surge and Dynamics
In the wake of the Chinese New Year festivities, container spot rates are exhibiting a shift from their upward trajectory prompted by the Red Sea disruption. The 45-day period ending January 31, 2024, saw remarkable gains in the World Composite Index, largely influenced by re-routings and supply chain adjustments.
The disruption in the Red Sea led to strategic re-routings away from the Suez Canal, resulting in heightened rates, especially in the Asia-Europe and Asia-Mediterranean trade sectors. Rates in Asia-Mediterranean surpassed USD 6,300, appreciating by 275%, while Asia-Europe rates reached USD 5,000, appreciating by 245%.
Market analysts, however, voiced concerns about the imbalance in the rate surge, considering the extended transit distance and time. Questions arose about potential artificial demand creation, leading to discussions on alternative modes such as Sea + Air.
Chinese New Year Impact
As the Chinese New Year, heralding the “Year of the Dragon,” approaches, there is a perceptible cooldown in the sprint of container spot rates. Industry insiders anticipate a right-sizing or reversal of the surge witnessed in the past 45 days, aligning with the shifting demand dynamics during the holiday season.
Anticipations include a possible reversal or right-sizing of the surge, considering the Chinese New Year impasse. While a complete reversal is unlikely, adjustments are expected to align with demand dynamics, contributing to a plateauing scenario during the holiday season.
Carrier Responses and Recommendations
Carriers are anticipated to respond with General Rate Increases (GRI) following the surge, but the ongoing impact of added costs, such as surcharges and insurance premiums due to Suez re-routings, continues to influence pricing. Longer transit times resulting from the re-routings also play a role in the evolving dynamics.
The industry recommends a forward-looking approach for critical shipments, emphasizing the need to factor in supply chain considerations for various contingencies. Navigating the container spot rate landscape requires strategic planning amid uncertainties.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: Container News
