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CONTAINER PREMIUMS: Trans-Pacific rates reach their ceiling amid uncertainty in China

Highlights

COVID-19 outbreaks around Chinese port cities threaten cargo flows

Widespread cancelled sailings keep supply tight ahead of Lunar New Year

All-inclusive container shipping rates from North and Southeast Asia to North America were widely viewed as having reached a medium-term ceiling after returning to record high levels, but support is expected to be maintained at least for another month on demand for restocking ahead of the Lunar New Year holiday.

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Conditions in China were a source of great uncertainty as the ports of Tianjin and Shenzhen joined Ningbo in having their operations impacted by COVID-19 outbreaks, restricting the landside flow of cargoes in some areas and putting greater strain on the largest container port in the world in Shanghai.

Freight rates including premium service fees were by far the most predominant in the spot market for trans-Pacific shipments. All-inclusive rates from China to West Coast North America consolidated mostly in the $16,000-$20,000/FEU range, with the lower end of the range occupied by charter carriers and the higher end by alliance carriers. Rates to the East Coast of North America were similarly rangebound at $17,000-$21,000/FEU, shippers and freight forwarders said.

"As China cracks down on [COVID-19] coronavirus outbreaks, workers are leaving their jobs early for the holidays and getting them back could be a challenge," a US-based freight forwarder said. "That could mean a bigger slowdown in February than expected, but for now, cargo volumes and blank sailings will keep rates where they are without any further spike."

Shipments from China to South America were similarly impacted, with premiums increasingly demanded by carriers to ensure on-time loading. All-inclusive rates to both the East and West Coast of South America were around the $16,000/FEU level for priority loading, although base FAK rates were still achievable at the $12,000/FEU level to Brazil and $13,500/FEU to Chile for shippers with greater flexibility on loading dates and volume sizes.

Rates from Southeast Asia steady ahead of LNY

Premium rates were unchanged the on Southeast Asia to North America trade lane during the week ending Jan. 14 as bullish sentiment from supply chain disruptions was offset by a lull in short term bookings, sources said.

All-inclusive rates were heard at $18,000-$19,000/FEU for Southeast Asia to East Coast North America, and $15,000-$18,000/FEU to the West Coast.

"Most clients have already placed orders to avoid the pre-Chinese New Year rush. There is anyway no space available for new bookings, so prices are stable," a source based in Singapore said, adding that the congestion and shortage issues continue to linger.

Another source, based in Vietnam, said premium rates were supported by transportation issues stemming from COVID-19 outbreaks amid a lack of carrying capacity as carriers cancel sailings.

But most shippers have now adjusted to these market conditions and place their orders well in advance and have fewer complaints about delays and long turnaround times, a freight forwarder based in Singapore said.

"Doesn't look like the situation will be improving anytime soon," the forwarder said. "The only relief is that customers are getting smarter and are planning ahead. This is good for the business as more orders are coming in. Demand is very strong and it's likely to remain firm even after Chinese New Year."

Further COVID-19 outbreaks around Chinese ports will continue elevated even after Lunar New Year, sources said.

"Despite the [COVID-19] outbreak at Shenzhen, the port situation is manageable, but there are some trucking issues," a cargo owner based in Singapore said. "Overall, things are under control and there is no major impact on operations."

Container volumes at the Port of Singapore were 37.5 million TEUs in 2021, the highest annual throughput in the port authority database going back to 2011. Total volumes were up by 1.6% year on year from 36.9 million TEUs in 2020, according to preliminary data released by the Maritime and Port Authority of Singapore on Jan. 13. But throughput at the port in December declined by 2.2% on year.

Asia-to-Europe rates wane as demand eases

Freight All Kinds rates from Asia to Europe trended lower over the course of the week to Jan. 14 as demand started to ease somewhat with Lunar New Year around the corner.

"The logistical issues are somewhat easing but not by a huge amount at the moment. There are a lot of people off across Europe with [COVID-19], so delays are building," a freight forwarder said. "This is countered by longer ship queues in China, so on balance it's pretty flat."

Expectations remain in the Asia-to-Europe market that rates will continue to slide into February, but there is still likely to be strong GRIs at the start of March as demand returns at pace to the market.

Platts Container Rate 1 – North Asia to North Continent – was assessed at $15,250/FEU, down $450 on the week, while the premium for UK delivery over North Continent narrowed to $1,250/FEU from $1,500/FEU a week earlier.