Seatrade-Maritime: Transpac spot rates on the way up

Published by Seatrade-Maritime

Consultant Drewry’s latest weekly report shows Pacific rate are rising to both Los Angeles and New York, 10% and 14% respectively.

Increases have reached at $3,357/feu to LA and $4,252/feu to New York due to emergency fuel surcharges imposed as a result of the blockade on the Strait of Hormuz and the expected demand surge as peak season begins.

In addition, Yang Ming has announced a general rate increase of $2,000/feu from 15 May, and the consultant said it expects rates to increase further in the coming week. 

In an apparent contradiction, Drewry reports that there are seven blank sailings on the Pacific trades for the coming week, as carriers continue to manage capacity, suggesting demand remains weak.

Xeneta, which reports regional rates rather than port-to-port, said that rates had plateaued over the past month, 50% higher than pre-war levels, but at a lower level than Drewry’s index, $2,884/feu to the US West Coast and $3,974/feu to the US East Coast, up 2% to both ports.

“One factor behind the short-term market plateau on the Transpacific is US shippers delaying signing new long-term contracts due to the uncertainty caused by the Middle East crisis and the risk of locking in rates for the next 12 months at a higher level than necessary,” said Xeneta chief analyst Peter Sand.

That means more cargo is moving on spot, but Sand believes that shippers will not want to rely on the spot market and will be tempted by carriers offering discounts on contracts in an effort to win market share.

“As new long-term contracts are finalised and come into force, volumes will shift back to contracted rates and that should translate into a softening of the short-term market. This will be gradual softening rather than a dramatic fall off a cliff edge back to pre-conflict levels, particularly ahead of the traditional peak season build-up later in the summer,” according to Sand.

Capacity to the US West Coast from the Far East is up 1.6% week-on-week, while East coast capacity is falling over the same period by 1.7%.

It is a very different story on the Asia to Europe trades, with Drewry’s reporting significant increases for freight to Rotterdam and Genoa, 11% and 20% respectively. Meanwhile, Xeneta’s regional index indicates significant declines to North Europe and the Mediterranean of 8% and 12% respectively.

“The Asia-Europe peak season is expected to start earlier than usual as higher cargo bookings, tight vessel space, and disruptions linked to the US/Israel-Iran conflict are prompting shippers to move cargo earlier,” said Drewry.

Xeneta, however, argues that spot rates to Europe are now just 4% over pre-war levels.

“What this demonstrates is that the carrier workarounds on these corridors – the land bridges, the rerouting, the new service networks built around the disrupted areas – are now functioning well enough that the market has largely absorbed the crisis as underlying overcapacity reasserts itself,” said Sand.

European offered capacity is down 5% on both the Mediterranean and North European trades, week-on-week, much of the displaced capacity appears to have diverted to the Atlantic where westbound capacity has increased 5.9% over the week.