Container shipping spot freight rates on the Asia-North Europe trade declined 2.7% this week – a further sign the recent exponential growth has levelled off.
Today’s Shanghai Containerised Freight Index (SCFI) Shanghai-North Europe leg was $4,276 per teu, down $117 per teu from last week, as carriers began to release more equipment to customers in China.
Christoph Baumeister, senior trade manager Asia/ISC-Europe at Flexport, said the rates decline was mainly driven by prepaid contracts and that carriers were accepting more bookings “in order to create a roll pool ahead of Chinese New Year”.
He added: “We could see carriers accept and confirm significantly more bookings for the upcoming weeks. Carriers have released more equipment. The big question is what will happen after Chinese New Year.
“Will the demand bounce back immediately? In Shanghai and Ningbo, trucking capacity is already very short and, with the 14 days quarantine rule, it will be even more challenging for shippers as employees travelled home to their families,” he added.
The spot rate drop comes as evidence mounts that the sky-high freight rates between Asia and North Europe are making the transport of many lower-value cargo items effectively loss-making, with shippers wondering whether to pull the plug on transcontinental supply chains.
The actual rate shippers and forwarders are paying carriers stands at around double the SCFI figure, due to the myriad surcharges and space and equipment guarantee fees.
One major importer in the UK told The Loadstar this week; “We all understand supply and demand controls market prices, but there has to be some serious discussions about the long-term impact of this. I only see a price cap for ocean freight as a way this can be controlled.
“The importer or freight forwarder/clearing agent in most cases has to bear any added costs, and 99% of the time we are too concerned about retaining business to pass these costs on to our customers.”
The current environment is also having a large impact on annual contract negotiations on the trade, with many carriers reported to be refusing any new accounts for this year and reducing the allocation of existing customers negotiating renewals.
Sources suggest contracts renewed in March will be at reduced capacity, while contract rates for this year will be in region of $3,500-$4,000 per 40ft.
Recent contract rate data from freight rate benchmarking platform Xeneta supports this. Its latest XSI Public Indices show contract rates for European imports surged 19.3% month on month, “mostly driven by flows from Asian origins”, leaving the benchmark up 12.5% year on year.
“The high spot rates seen on key trading lanes over the past few months have cascaded into contracted agreements, putting the squeeze on shippers worldwide,” said CEO Patrik Berglund. “This is an extreme situation and the rate of development is breath-taking. Negotiations are understandably difficult at present.
“What will happen next? It’s impossible to say with any confidence, but we can expect further change. We know Beijing is keen to stabilise rates and protect exports. So if we begin to see importers abandoning exports from Asia due to extortionate rates, then expect the authorities to step in. But what measures will they, or can they, take?” he asked.
Meanwhile, the SCFI’s Shanghai-Mediterranean leg inched up $41 to finish the week at $4,337 per teu.
The transpacific trades continued to be relatively flat: Shanghai-US west coast edged up $93 to end the week at $4,088 per 40ft; and rates to the east coast declined marginally, by $71, to finish the week on $4,679 per 40ft.
The largest week-on-week trade change at SCFI was the Santos, which dropped $326 per teu to end the week at $8,544 per teu.