As bookings from China to North Europe and the US west coast collapse, driving FAK prices to record lows, ocean carriers are reportedly in “panic mode,” as reported by The Loadstar.
Vigorous blanking
The lines have failed to stem the sharp decline in short-term prices despite vigorous blanking that has cut weekly capacity on the tradelanes by more than a third. In fact, it might be argued that they are fanned the flames by providing sub-economic spot rates via their digital platforms.
For instance, rates of $1,000 per 20-foot container and $1,800 per 40-foot container from Shanghai, Tianjin, and Shenzhen to the Le Havre-Hamburg range of container hubs in North Europe are now commonly available for quick shipment.
Additionally, some carriers are rumoured to be willing to waive or relax the terms of demurrage and detention as well as further reduce rates in exchange for volume.
The spot market indices have been unable to keep up with the rate erosion on the Asia-North Europe tradelane, which is making a mockery of them. For example, Drewry’s WCI recorded the lowest reading this week with a 14% decline, to $2,687 per 40ft, for its North Europe component.
Negative impact
“The westbound market seems like it’s in panic,” a UK-based forwarding executive told The Loadstar this week.
“I am getting approximately 10 emails a day from random agents offering very low rates. Today, I had $1,800 into Southampton, which is crazy; it seems to be panic,” he said. “There hasn’t been a Christmas rush on westbound and I put that down to the recession. As a country, we are not buying as we used to during the pandemic.”
He said he was hearing that carriers were blanking sailings right up to Chinese New Year, which falls on 21 January, to drive up rates, but, he added, “personally, I don’t think that the volume is there”.
He continued: “This is all reflected in the number of hauliers contacting us asking for work – again, emails every day saying they have capacity from all ports.”
While this is happening, transpacific long-term rates are being negatively impacted as carriers are obliged to provide consumers temporary discounts on contract rates as short-term rates from China to the US west coast decline to sub-economic levels.
In fact, Israeli carrier Zim told The Loadstar last week that in order to protect its business, transpacific contracted clients had to agree to price reductions.
CFO Xavier Destriau said, “The demand and volume were not there, so we had to cope with a new reality and communicate with our consumers.”
Indications of succumbing
The US west coast component of Xeneta’s XSI spot index was unchanged this week at $1,941 per 40 feet, having fallen by 20% so far this month, while east coast prices were down 6% on the week at $5,045 per 40 feet, according to Drewry’s WCI.
According to the spot rate indices, the transatlantic market continues to be the one bright spot for carriers, with lines continuing to enjoy short-term rates of between $6,500 and $7,600 per 40ft from North Europe to the US east coast.
However, the outlier trade lane is beginning to show indications of succumbing to the general rate decline as US east coast port congestion eases, the port of Liverpool restarts normal operations following strike action, and carriers are deploying additional capacity.
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Source: The Loadstar
