Container spot freight rates are currently experiencing declines on major East-West trades due to a combination of weak demand and excess supply. However, there are some notable divergences and a potential upswing on the Asia-North America route.
Asia-North America Spot Rate Divergence
This week, several indices showed a significant increase in transpacific spot rates. The Shanghai Containerised Freight Index (SCFI) recorded a 17% week-on-week increase for shipments from Shanghai to the US West Coast and a 10% rise to the US East Coast. Similarly, the Ningbo Containerised Freight Index (NCFI) showed a substantial 45% increase to the US West Coast and a 25% increase to the US East Coast.
However, these upward trends contrast sharply with other indices. The Drewry World Container Index (WCI) showed a 3% decline on its Shanghai-Los Angeles leg and a 5% decline on Shanghai-New York. The Freightos FBX also reported a 10% drop on its China-US West Coast route. Meanwhile, Xeneta’s XSI remained relatively flat, with only minor week-on-week decreases.
The simplest explanation for this divergence is that the forward-looking SCFI and NCFI indices are anticipating that the upcoming General Rate Increases (GRIs) on September 1st will be successful. Another potential reason is a rise in demand ahead of China’s Golden Week holiday in October.
Declining Asia-Europe Rates and Market Outlook
In contrast to the transpacific volatility, spot rates on the Asia-Europe trade continued their downward trend. The Xeneta XSI saw a 3.6% week-on-week drop for the Far East to North Europe route, and the Drewry WCI recorded a 10% loss on its Shanghai-Rotterdam leg. The forward-looking SCFI and NCFI indices also offer little hope for an immediate rebound, showing drops of 11% and 14%, respectively.
According to Xeneta’s chief analyst, Peter Sand, current spot rates are approaching pre-Red Sea crisis levels, a point at which carriers were experiencing significant losses. He notes that while carriers may still show an overall profit for the year, it will be due to earlier volatility, with the fourth quarter potentially returning to a loss-making environment. This soft pricing environment means that shippers will soon begin focusing on annual contract negotiations.
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Source: gCaptain
