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CONTAINER PREMIUMS: All-inclusive spot market rates depressed as Shanghai lockdown tightens

Highlights

Shanghai to reopen May 20

Rates continue to slide on weaker-than-anticipated demand

Premium spot bookings out of Chinese baseports remained under pressure during the week to May 13 amid tenuous demand for Chinese export cargoes.

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As Shanghai concludes another week of coronavirus lockdowns, production capacity and resultant export volumes continued to slide -- keeping rates under pressure -- despite a spike in blanked sailings as ocean liners attempt to compensate a downtrend in rates.

"China's continuing zero-tolerance policy towards COVID in 2022 have created an ever-present threat of port closures and operational restrictions, as seen at both Ningbo and Shanghai. Along with Chinese New Year, these restrictions will likely have eased some burden on the volume flows out of China, but likely also have created additional backlog," market analyst Sea-Intelligence said in a report May 11.

Authorities indicated May 13 that the Shanghai restrictions were set to be lifted from May 20, but sources note that it will take significantly longer for production capacity to resume.

During the week to May 13, S&P Global Commodity Insights heard most deals negotiated on an FAK basis, as the rationale for premium loadings and disport allocations was thin amid large pockets of FAK space available. However, sources suggest that priority equipment, loading and transit fees can still command a $1,000-$3,000 premium over FAK base rates.

"Premiums are definitely waning, they are really not there," said a US-based freight forwarder, adding that FAK rates are holding steady despite weak demand.

Further downside in Southeast Asian market

The all-inclusive premium rates on the Southeast Asia-North America route slipped further during the week ended May 13, with continued uncertainty around operations in North Asia further assisting the Southeast Asian market, according to sources.

During the week, S&P Global heard all-in booking rates from Indonesia to East Coast North America (ECNA) at $13,600/FEU, and at $10,100/FEU to West Coast North America, or WCNA. This is down from $14,000/FEU (ECNA) and $13,000/FEU (WCNA) values heard in the market during the week ended April 29, sources said.

"The situation in China [lockdown and limited industrial activity] will at least take until June to come back to normal," a freight forwarder based in Indonesia said, adding that this has helped all-inclusive booking rates come down as carriers now have additional capacity to deploy in the region till May-end at the least.

From Singapore, all-inclusive rates were heard as low as $12,000/FEU to ECUS and $10,125/FEU to the west coast. However, rates were also heard around $15,000/FEU for certain North American base ports from Singapore.

In the South Asian market, all-inclusive booking rates from Bangladesh to East Coast North America were heard in the $16,000-$22,000/FEU range.

"Based on the carrier, we're paying anywhere between $16,000-$22,000/FEU. Considerably higher than others [India]," a logistics provider based in Bangladesh said. "However, the situation at the port [Dhaka] is much better."