Amid a fresh round of general rate increase (GRI) announcements by liner companies, trans-Pacific and Asia-Europe shipping routes have experienced significant rate hikes, effectively curbing the downward trend in spot rates on trans-Atlantic routes.
Following a 31% increase in the Xeneta XSI Asia-North Europe spot rate index in the previous week, the index saw a slight 2.5% decline last week, averaging $1692 per FEU.
Despite the average rates falling below the liner companies’ target of around $2000 per FEU FAK, this round of GRI hikes has proven successful, positioning them to pursue further GRI increases in September. Moreover, some liner companies’ prices for China-Northern Europe routes remain at or below $1300, with a two-week validity period.
Nonetheless, Asian-Northern Europe liner companies have shown a more prudent approach to capacity management. Leading Mediterranean Shipping Company (MSC) cancelled a restarted independent service over the past two weeks. Despite the significance of the relaunched “Swan Loop” in May, MSC cancelled the service due to weak demand.
The proactive stance of liner companies towards capacity management aligns with the somber outlook on container shipping profitability outlined in Maersk and Hapag-Lloyd’s Q2 earnings reports. Hapag-Lloyd CEO Rolf Habben Jansen noted that many routes were experiencing “freight rates significantly below cost” and were “unsustainable.”
He indicated that until 2024, capacity growth will continue to outpace demand, meaning, as he stated, “we need to actively control costs again, just like in the past.”
However, the more resilient spot container freight rates on the Asia-Mediterranean route seem to remain unaffected by any pressure from additional capacity influx. Drewry’s World Container Index (WCI) for this route remained unchanged last week at $2072 per FEU.
On the trans-Pacific route, targeted capacity management also played a crucial role in sustaining the recent GRI hikes. The XSI Asia to US West Coast data saw a 3.5% uptick last week, reaching $2006 per FEU. On the US East Coast route, the Freightos Baltic Index (FBX) rose by 9% last week, reaching $2904 per FEU.
This could be attributed to a surge in the number of days ships have to wait to pass through the Panama Canal, as decreased water levels led to reduced daily vessel allowances, causing delays.
In other trade lanes, on trans-Atlantic routes, the steep decline in spot rates seems to have bottomed out, with all indices stabilizing last week between $1600 and $1700 per FEU.
