Rates remain at peak levels despite escalating uncertainty
There were some discounted rates available from Chinese forwarders eager to fill space ahead of the holiday break beginning on Feb. 1, but buyers may need to accept greater uncertainty to go with lower prices.
Most of the market for shipments from China to the West Coast of North America was still priced in the $16,000-$20,000/FEU range including premium service fees, while rates from China to the East Coast of North America remained at around $17,000-21,000/FEU, depending on port pairs.
Some forwarders were offering discounts to $12,000/FEU to the West Coast and $13,000/FEU – still well above Freight All Kinds base rates of $9,500/FEU and $10,900/FEU respectively – but cargoes booked at such levels may have to wait longer at destination ports to unload, and could be rolled indefinitely at loading ports through multiple sailings despite the implied priority service.
“Carriers are taking booking for what we are calling a ‘roll pool’ where they will keep getting rolled until space on a ship opens up,” A US-based freight forwarder said. “There is also a huge risk of per diem fees on the destination side from delays in returning equipment, but importers are still clamoring to get their stuff out in case the Lunar New Year slowdown is extended by a [COVID-19] outbreak.”
Switzerland-based shipping line MSC, recently crowned the world’s largest container carrier, announced on Jan. 17 that it would cancel five sailings from China and one from Vietnam between Jan. 30 and Feb. 14 due to weaker demand around the two-week Lunar New Year break.
Premiums from Southeast Asia supported by disruptions
Premium container rates inched up on the Southeast Asia to East Coast North America route amid increasing supply chain disruptions with a rise in coronavirus cases at Chinese ports, sources said. But rates to the West Coast of North America were unchanged this week.
For Southeast Asia to East Coast North America, all-inclusive prices were heard at $18,000-$20,000/FEU, slightly higher than the upper limit of $19,000/FEU a week ago, sources said. Rates for the shorter West Coast route were steady at $15,000-$18,000/FEU.
“Demand may be weak for the short-term bookings as Chinese New Year is round the corner, but overall, it’s pretty strong especially from the electronics and pharma sector,” a freight forwarder operating out of Vietnam said.
Customers are planning better and not upgrading their bookings as frequently as before, keeping prices rangebound, the forwarder said.
But delays and disruptions continue to rule the market. “Most of the vessels are running late. I have witnessed instances where import cargoes to India are in transit for 2-3 months,” the Vietnam-based forwarder said. “In some cases, cargo from China took more than three months to arrive.”
The average transit time has nearly doubled for most of the sailings from China and a relief is unlikely even after Lunar New Year due to coronavirus infections, sources said.
“Trucking operations have already taken a hit and our company has also suspended air cargo operations at some ports,” a freight forwarder based in China said. “There is a strong concern of disruption in ocean services due to increasing number of COVID cases at the ports.”
Shipping lines plan for Asia-to-Europe rate hikes
The Asia-to-Europe container freight market saw some slight downside in the week ending Jan. 21, as was expected with loading periods now stretching into the Lunar New Year holidays.
Platts Container Rate 1 – North Asia-to-North Continent – was assessed at $1,500/FEU on Jan. 21, down $250 on the week.
“At this point, there are still delays. China is closing already due to [COVID-19], and then it’ll also close due to Lunar New Year, so it could be a lengthy backlog of demand that will push rates back to their start of 2021 levels,” a shipowner representative said.
But further out, sentiment is starting to turn bullish again in the market, with rates expected to rise significantly after the February holidays as the backlog of demand building up from blank sailings over the holiday period bites in the market.
General Rate Increases of $500/FEU have been nominated by major shipping firms for Feb. 1 for Asia-to-Europe trade lanes, but even stronger increases are expected in mid-February.
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