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CONTAINER PREMIUMS: Rates continue surging in limited window ahead of LNY


Trans-Pacific rates from China reach new high in pre-LNY demand rush

Southeast Asia spot market lacking liquidity with all ships booked out

  • Author
  • Greg Holt    Parisha Tyagi    David Lademan
  • Editor
  • Richard Rubin
  • Commodity
  • Shipping

Container freight rates including premium service fees continued to escalate this week on trans-Pacific trade lanes from North Asia to North America on the back of widespread restocking by retailers ahead of Lunar New Year beginning Feb. 1, which is marked by operational slowdowns in East Asia.

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Available empty containers and space on ships leaving Asia in January was limited by cascading cancelled sailings across global networks as heavy port congestion forced shipping lines to reschedule their trans-Pacific voyages.

Premium rates China to West Coast North America were mostly around the $18,000/FEU level, but a handful of shippers with large volumes and urgent requirements paid as much as $25,000/FEU for delivery to West Coast ports, firmly establishing a return to the previous peak from August-September 2021.

"The cancellations are unreal: 48% of sailings to Los Angeles/Long Beach have blanked," a US-based freight forwarder said. "There just isn't any space and rates are premium only, that or nothing. This means for certain that not everything can get out before Chinese New Year."

From China to the East and Gulf Coasts of North America, premium rates were available in a wide range of $17,000-$23,000/FEU depending on the destination. For comparison, base Freight-All-Kinds rates from North Asia increased to new all-time highs in late December at $9,500/Feu to the West Coast and $10,900/FEU to the East Coast.

"We are back to having vast majority of our floating cargo under premium rates," a trans-Pacific shipping line representative said. "This situation will probably last through [late January or early February], but another round of schedule resetting or blank sailings could keep the momentum strong."

Premium rates from Southeast Asia hold steady

Container premium rates on the Southeast Asia to North America trade lane remained unchanged due to unavailability of space in the run up to Lunar New Year.

The rates were largely heard around $17,000-$19,000/FEU for Southeast Asia to East Coast North America and $15,000-$17,000/FEU to West Coast North America.

"The rates are already so high, there is no room for any increases. Besides, most of the space has already been booked and there is no availability before the Chinese New Year," a source based in Singapore said.

While traditionally there is a slowdown in demand after the Chinese New Year, industry sources indicate that this year might be different, and the shortage may persist even in February and beyond.

An outbreak of COVID-19 in a district of Ningbo, China, has resurrected the specter of destabilizing Chinese port closures that shook the industry last year, particularly as the highly contagious omicron variant spreads to many different parts of the world.

"Beilun area has an outbreak but it is not the port, it is a garment factory. But since the factory is located in Beilun, which holds most terminals and CFS (Container Freight Station) warehouses, it has a direct impact on operations," a source based in China said.

Most CFS stations in the region have been closed, and while terminals are still up and running, truckers can't move freely in and out of Beilun, the source added.

"The consequences might be worse," the source said. "The disruptions in China will never stop. As long as they have zero tolerance for the virus, it will continue for years, unless a super vaccine comes and works 100%."

Asia-to-Europe base rates soften

FAK bookings made up the lion's share of market activity this week, although some sources noted premiums of $2,000/FEU were applicable for prompt loading and guaranteed capacity.

Despite bullish sentiment during the week, base rates on the Far East Westbound routings slid from one-month highs amid a slight increase in available capacity ahead of the Lunar New Year celebrations.

Platts Container Rate 1 – North Asia to North Continent – fell $300/FEU to $15,700/FEU, while PCR11 – North Asia to UK – dropped by $500/FEU to $17,000/FEU, tightening the spread with rates to the continent to $1,300/FEU.

Most sources expect rates to soften in the coming weeks as renewed lockdowns in China and the upcoming Lunar New Year holiday put a damper on demand, which could serve to eliminate premium surcharges for the time being.