North Asia-to-South America container rates set records with first assessment

Container rates from North Asia to South America have touched new all-time highs as shipping lines pushed through new rates increases for September amid a severe shortage of equipment and carrying capacity at Asian export terminals during August-November peak shipping season before year-end holidays.

But rates from North Asia to the West Coast of South America have overtaken rates to the continent's East Coast despite the shorter distance to the West Coast. Congestion at Los Angeles, California, and ports on Mexico's Pacific Coast are extending transit times to Colombia, Ecuador, Peru and Chile, making those routes more expensive for shipping lines relative to other trans-Pacific trade lanes.

Platts Container Rate 31 – North Asia to East Coast South America – was assessed by Platts for the first time on Sept. 1 at $11,200/FEU, an increase of nearly 560% from the market rate of $1,700/FEU heard for May 2020. Platts Container Rate 29 – North Asia to West Coast South America – was assessed for the first time on Sept. 1 at the even higher level of $12,000/FEU.

North Asia-to-South America trade volumes have grown steadily year on year as South American economies grew and expanded their import and export activity. Container shipments from North Asia to East Coast South America jumped by 121,000 twenty-foot-equivalent to 617,000 TEUs during the six months to July 2021, compared with the same period in 2020, according to Panjiva, the supply chain research unit of S&P Global Market Intelligence, a sister company to Platts. Meanwhile, shipments from North Asia to West Coast South America grew by 79,000 TEUs to 760,000 TEUs during the same period.

Brazil has also been making steady progress in increasing its containerized export trade with China, growing its meat trade with China by 85% in two years to more than $7.4 billion in 2020 from around $4 billion in 2019, according to Panjiva. Cotton exports, which have been responsible for an uptick in backhaul container rates in August, climbed to more than $1 billion in total value for shipments to China for the first time in 2020.

"The government was offering cash handouts for a while, but those have since been cut off," a Sao Paulo-based freight forwarder said. "We saw growth in demand for women's cosmetics and various cheap goods from China, which was enough to boost import volumes."

Chile relies on Asian goods, but food exports miss the boat

On South America's West Coast, Chile is a major exporter of copper and other metals due to its abundance of mineral resources, but relies on imports from Asia for most of its consumer goods such as mechanical and electrical devices, clothes, autos and furniture, as well as raw materials such as steel and plastics. Chile also has key export industries of fruit, nuts and seafood that often travel by refrigerated container to Asia, but a lack of available equipment at Chilean ports constrained those shipments in the first-half of 2021, similar to the conditions faced by US agricultural exporters.

Exports of fruit and nuts from Chile to China grew to a $2.16 billion industry in 2020 from $1.96 in 2019, but overall container export shipments from the West Coast of South America to North Asia dropped to 444,000 TEUs in January-July 2021 from 511,000 TEUs for the same seven-month period in 2019, according to Panjiva.

"It's a really bad situation for exporters," a Santiago-based freight forwarder said. "The shipping lines are not offering space for months ahead and the prefer to export empty containers to Asia. Some of the cargoes meant for export have to find buyers in internal markets, and it doesn't look like things will improve until 2022 since the shipping lines are not respecting contracts."

Global container shipping costs have soared in the past 14 months amid widespread port congestion, equipment imbalances and pandemic-related supply chain issues, key factors that have been driven by an unforeseen level of elevated consumer demand for products moving in containers. The Platts Container Index, a weighted average of Platts' key global routes, was assessed Sept. 1 at $7,645/FEU, up 365% from the same date in 2020.