FEATURE: Backhaul container rates for US exports poised for rebound

New York — Container rates for backhaul routes from the US to Asia could rebound as soon as late November as focus turns to US export cargoes neglected in the recent rush of imports.

German shipowner Hapag-Lloyd announced last week a $1,000/FEU General Rate Increase for westbound shipments from North America to East Asia to take effect Nov. 25. That would be a significant increase for Platts Container Rates 6 and 14 – East and West Coast North America to North Asia, respectively – last assessed at $475/FEU and $425/FEU.

Those rates have for the last two weeks hovered at their lowest levels since March, brought lower as a glut of import cargoes from Asia created a surplus of empty containers at North American ports in the third quarter. Shipowners are hopeful this congestion will ease towards the end of November, but any remaining pile up of containers at US ports could weaken the case for a backhaul rate hike.

The Port of New York and New Jersey, busiest on the East Coast of North America, exported twice as many empty containers as loaded containers in August and September, while the same was true from July to September at the Port of Los Angeles, busiest on North America's West Coast.

By contrast, Platts Container Rate 5 – North Asia to East Coast North America – was last assessed at $4,500/FEU, nearly 10 times the backhaul rate. The unusually wide gap between headhaul and backhaul rates for the route provided little incentive for shipowners to seek out backhaul cargoes, although this is expected to change as the flow of US import cargoes eases towards the end of the year.

"There is expected to be a big increase in resin exports cargoes from the Gulf, so we will see if that materializes," said a North Asian shipowner who nominated a backhaul GRI from East Coast North America to North Asia from mid-November at around $700/FEU. "It would be nice if we can hang on to this level of revenue and get backhaul rates up to normal levels."

As shipowners prioritized returning empty containers to Asia over loading export cargoes during the past few months, many soybean growers in the US Midwest seeking to export to Asian countries have struggled to find enough available containers during their harvest season beginning in September.

"We can understand that there was an increased urgency to get containers back to Asia to maximize turns per year," said Mike Steenhoek, executive director of the Iowa-based Soy Transportation Coalition. "In agriculture, this has been a difficult time to secure containers for exports. We pride ourselves on reliable transportation, but it is a concern when that reliability is challenged."

China imported 1.2 million mt of US soybeans in September, Chinese customs data showed, but most of this arrived by bulk carrier to be used in animal feed. But China is only the third largest destination of containerized US soybean exports with 11% of 200,000 twenty-foot equivalent units in annual shipments.

Taiwan is the top destination of containerized soybean shipments at 28%, followed by Indonesia at 25%, according to the Soy Transportation Coalition. Thailand, Malaysia, Vietnam and Japan are also important importers with around 5%-10% of the annual total.

"Some soy exporters can shift from containers to bulk, but some companies are built on the model of container shipment," Steenhoek said. "Many of these companies have small batch, specific grades of soybeans, some of which are non-GMO. If they can't get any empty containers, their business model may have to change."