Demand driving transpacific prices sky high, with Asia-Europe benefiting too

By Gavin van Marle 14/08/2020

Container spot freight rates on the transpacific trades leapt this week, with prices from Asia to US west coast ports sailing way above $3,000 per feu – and looking set to jump higher.

Today’s Shanghai Containerised Freight Index (SCFI) reading – prices quoted for next week – was $3,406 per feu, an increase of 8.3% over last week’s reading of $3,144.

It showed a slight variation with the midweek Freightos Baltic Index (FBX), which reported a rate of $3,058 on Wednesday, which Freightos said was some 110% higher year on year.

The SCFI’s Shanghai-US east coast rate also grew, to $3,913 per feu, an increase of 11.6% week on week, although Freightos noted that the price spread between west and east coasts had been narrowing, suggesting US shippers were increasingly attracted to the quicker transit times the west coast gateways offered.

“And though rates have increased to both coasts, the current conditions have impacted rates from China to the US west coast much more than prices to the east coast,” said Freightos chief marketing officer Eytan Buchman.

“Rates to the west coast have climbed 15% since the end of July – twice as much as for the east coast. It is usually about $1,200, or 42%, more expensive to ship on the longer voyage to eastern ports. But since the rebound in volumes in June, that gap has closed by half.

“This week east and west coast rates were separated by only $408 or 12%, an all-time FBX low.”

The rising prices on the transpacific would appear to be almost entirely driven by demand, as capacity the Far East-US west coast has almost been completely restored, according to liner database eeSea.

It shows just six transpacific headhaul sailings out of 165 in August were due to be, or have been, blanked, while for September just one blank sailing out of 160 scheduled departures has been announced.

In terms of slot capacity, August is 6% down on the trade’s pro forma capacity of 1,364,000 teu, and eeSea data shows next month’s actual capacity could be 101% of pro forma.

Loadstar sources have suggested that much of the current demand is being driven by importers of PPE equipment opting for container shipping services into the west coast, rather than using more expensive air freight.

According to a report in shipping news site Splash247, the recent increases on the trade have led China’s ministry of transport to write to six of the largest carries seeking an “explanation” for the rises.

And the demand spike on the transpacific now appears to be having knock-on effect on Asia-Europe, which has already been suffering from a severe capacity crunch, although pricing has remained stable. The SCFI reading for Shanghai-North Europe today stood at $916 per teu, a marginal rise of $6, and at $967 for Mediterranean ports, an increase of $27.

Capacity has also been returned to the route – with slot capacity at 90% of the pro forma schedules in August, and set to rise to 91% next month, according to eeSea data.

However, it is not only vessel capacity that has kept forwarders awake at night – growing equipment shortages appear to be weighing heavily on their minds.

“The market continues to be strong on trade, and space is very tight from most ports out of China in the coming two weeks,” Martin Holst-Mikkelsen, head of ocean freight EMEA at Flexport, told The Loadstar. “Rollings are increasing. We see equipment shortage issues increasing, particular out of the South China region.

“We are also seeing carriers giving preference to equipment towards the transpacific trade, given the very large rate increases, we have seen on that trade.

“The extra loaders introduced by a number of carriers have been extended into the coming weeks to take advantage of the healthy rate levels we are seeing. Yet the overall trade capacity remains down year on year,” he added.

And although indications are that prices are set to climb, they are unlikely to jump in the same way they have on the transpacific.

“Rates remain stable on the spot market in the coming week, and thus we haven’t seen a large effect from attempted increases mid month,” Mr Holst-Mikkelsen said. “Carriers are trying to push up September FAK rates, and some representing each alliance have announced a PSS for September of around $150 teu for longer-term contracts.

“Some carriers are possibly building a roll pool, to add support for increasing the rates.”