High trans-Pacific container rates trigger spikes on other ex-Asia routes

New Delhi — Strong demand and attractive rates for trans-Pacific routes have worsened the container shortage in Asia, leading to a domino effect on prices on other routes within Asia.

The bigger companies have turned their attention to the more lucrative long-haul trips from Asia, limiting availability of empty containers in the region and driving intra-Asia rates higher.

Rates from South Asia to Australia increased by at least $200 per unit for both twenty foot and forty foot containers in the last one month, mostly because of container shortage, sources in India said.

To the Middle East, rates have now reached up to $750/unit, compared to around $500-$600/unit a month back.

French container carrier CMA CGM increased rates with effect from Sept. 1 on the Asia-India route by $300/twenty-foot equivalent unit and $500/forty-foot equivalent unit under the rate restoration program.

German carrier Hapag-Lloyd increased rates for Asia-Latin America, Asia-Europe and Asia-Middle East routes by between $150-$1,500/unit for all container types. The hikes come into effect over Sept. 15-Oct. 15.

Capacity fully booked

There is an imbalance in capacity within Asia due to an unexpected surge in demand on the trans-Pacific route, a Hapag-Llyod spokesperson said.

"Our container fleet reached its productivity limit: leasing availability and production capacity are fully booked until end of January. However, we have established guiding principles to ensure we can serve our customers," the spokesperson said.

While for China, a skewed export-import ratio has left shippers scrambling for empties, other Asian countries are staring at a shortfall as well as most companies are not interested in sailing short haul.

"We don't have any empty containers here ... After we export a commodity, we wait for the same units to return," a Vietnam-based freight forwarder said.

Focus on long-hauls

Companies like Yang Ming, MSC are focusing more on long-haul services, while OOCL, ONE, Evergreen, HMM, COSCO are comparatively more active intra-Asia, the freight forwarder said.

Market sources in India agreed.

"Top players are more interested in sailing long haul due to higher rates ... OOCL is not taking bookings for Australia and Europe and MSC is doing that at a higher price," a freight-forwarder based in India said.

In India, pre-booking is not an option anymore and containers are allocated only at the last minute, market participants said.

"Shippers allocate containers at the last minute and they have to be booked at spot rates, which are generally $200-$300/TEU higher than [rates for] pre-booked containers," a Mumbai-based freight forwarder said.

Exporters in Indonesia are also facing a container shortage and have no other option but to pay a higher rate, a local freight-forwarder said.

The slowdown in air cargoes also shifted traffic towards ocean routes, increasing demand for containers.

The North Asia to East Coast North America route -- known as Platts Container Rate 5 (PCR5) -- was assessed at $4,350/FEU on Sept. 15, the highest since S&P Global Platts started assessing the route in April.

On the North Asia to West Coast North America route --- known as the Platts Container Rate 13 -– the rate was assessed at $3,800/FEU on Sept. 15, also the highest since assessments started, Platts data showed.

Difficult to get back home

While the number of vessels going out of Asia is increasing, it is difficult to send these ships back home mainly due to disruptions in supply chains across the globe amid the pandemic.

The whole system of logistics has become a lot more inefficient globally. People are facing issues at every step of loading, unloading and transportation, a Mumbai-based executive with a container leasing company said.

"There is a shortage of trucks because drivers are not driving that much. Many factories are closed ... shipping lines expect to get back the containers quickly and carry the cargoes in it but that's not happening," the executive said, adding that things slow down further if someone is tested positive at a port.

"Redistribution is a constant challenge for markets in Asia. Where are the empties when needed?" Peter Sand, chief shipping analyst at BIMCO, said.

However, Sand expects this to be a short-term thing as "companies tend to find solutions to such issues."