The recent spike in ocean container shipping rates seems to be stabilizing, but uncertainty remains. Average spot rates from the Far East to the US East and West Coasts have soared, indicating a peak. However, varying factors such as capacity changes, potential strikes, and geopolitical tensions will influence future market movements, reports Xenata.
Spot Rates Peak
Recent months have seen a dramatic rise in ocean container shipping rates. As of July 17, average spot rates from the Far East to the US East Coast hit USD 10,078 per FEU, while rates to the US West Coast reached USD 7,917 per FEU. This marks an increase of over 140% since late April.
Fronthaul trades from the Far East to North Europe and the Mediterranean also experienced significant hikes, with spot rates rising by 163% and 95%, respectively, since April 30. Current rates stand at USD 8,499 per FEU to North Europe and USD 8,127 per FEU to the Mediterranean.
Xeneta data reveals that while average spot rates are climbing, the market ‘mid-high’ – representing the 75th percentile of rates – has remained flat. This indicates that fewer shippers and freight forwarders are willing to pay escalating spot rates, suggesting the market may be peaking.
The growth rate of average spot rates is slowing. For example, the increase from the Far East to the US East Coast was just 2.8% on July 15, compared to a 23% rise on July 1. This slowdown hints at a cooling upper market segment.
Data from Xeneta shows some carriers tried to push for higher spot rates in mid-July, but many offered lower rates instead. Shippers have begun to leverage this to secure better deals. For instance, anticipated rate increases on the Far East to US West Coast trade did not materialize, with rates actually falling by USD 50 per FEU.
Future Market Projections
Different trades are experiencing varied timelines. Spot rate growth has slowed from the Far East to North Europe, but some areas like Shanghai to Manzanillo have already seen a 10% rate drop. Despite ongoing Red Sea diversions, rates on major trades could soften, mirroring earlier trends this year.
Impact of Global Events
The primary driver of 2024’s market spikes is the conflict in the Red Sea, leading many container ships to reroute via the Cape of Good Hope. Unless ships return to the Suez Canal, which is unlikely, rates may not stabilize fully. Union strike threats in the US and potential tariff increases under a Trump presidency could further disrupt the market.
Long-Term Market Considerations
While port congestion is easing and new ships are increasing capacity, global shipping networks remain strained. The Q3 peak season may see less pressure due to earlier frontloading of imports, but capacity crunch risks persist.
Shippers’ Costs and Strategy
Despite potential rate declines, shippers are still facing elevated costs. For instance, rates from the Far East to North Europe are up by 457% since last December. Understanding market movements through data will be crucial for shippers to navigate the rest of 2024. Xeneta’s mid-year report offers insights into the Red Sea conflict’s impact and future market developments.
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Source: Xeneta
