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CONTAINER PREMIUMS: Spread between US Atlantic, Pacific Coast all-inclusive rates narrowing

Highlights

North American IPI bookings nearly impossible, closing in on $30,000/FEU

Vietnam closures further gum up Southeast Asian market

One-off North Asia-to-Antwerp booking heard at $28,000/FEU

The spread between eastbound trans-Pacific all-inclusive container freight rates to the US East and West coasts is slimming as demand for West Coast imports increases, while ports remain heavily congested.

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Sources said unpredictable lead times in Asia and aggressive frontloading by shippers have led to more cargo routed through the US Pacific Coast, which has escalated capacity constraints and pricing. Meanwhile, on the US Atlantic Coast, upward momentum on all-inclusive rates has slowed and in some cases halted their meteoric rise.

"What happens is that timelines are crunched, and the West Coast is fastest, so people are booking more and more through West Coast ... even as it's congested," a US freight forwarder said. "The USWC will always be priority because you can't ship it to other side of country fast enough. It's about coming to market in time."

During the week ended July 30, S&P Global Platts heard North Asia to West Coast North America premium bookings as high as $18,000/forty-foot equivalent unit, significantly higher than the $10,000 to $13,000/FEU average heard in weeks past. However, sources say that most bookings into the Pacific Coast have not yet reached the $18,000/FEU level, and instead float closer to $15,000/FEU.

One freight forwarder said an Interior Point Intermodal booking into Memphis cost $25,000/FEU, after it had been bid upward on the coloader market. And the freight forwarder suggested that the market is primed for August increases, which could push rarely accepted IPI bookings to fresh highs.

"The wheels are really falling off the wagon now," the freight forwarder said. "Big box shippers are going to load out, with all new bookings for September sailings. They're not really accepting August bookings anymore."

All market indications suggest that rates will head further north in August as a host of Port Congestion Surcharges (PCS), Peak Season Surcharges (PSS) and other charges come into effect.

Southeast Asia premiums escalate

The premiums tightened their grip on the Southeast container market with operations at Vietnam ports coming to a halt amid pandemic lockdown restrictions and infections rising in Indonesia.

The all-inclusive premium rate from Southeast Asia to East Coast North America was heard at $20,000-$25,000 per FEU and to West Coast North America at $16,000-$20,000 per FEU.

"The rules are so confusing. ... It's a complete mess here. ... The truckers can't move from one city to another without a test, workers can't come to the port, and the cargo is stuck," a source based in Haiphong said.

The increasing pile-up in Vietnam is likely to cause further troubles at the transshipment ports in Asia, majorly Singapore, which has already been congested for over a year now, sources said.

The transshipment ports have been a major pain point for exporters in Southeast Asia, and even if there is a timely loading at the port of origin, many shipments are stuck at the transshipment ports for weeks, sources said.

"The situation is getting worse each day," a freight forwarder based in Singapore said. "Things are completely out of control now ... My clients are so angry at me, but I am helpless."

While the impending August GRIs and a likely ramp-up in demand before the Chinese Golden Week holiday were likely to push prices further up, the premiums have spread to short-haul ex-Asia and intra-Asia routes.

"Now there is a premium everywhere but no certainty on space," an exporter-based in India said. "We are wary of taking orders on the CIF basis as there are drastic increases in freight rates overnight. If things keep going this way, we will have to shut our shops."

Premium bookings still rare in Asia-Europe trade

Rates from Asia to Europe remained at high levels over the course of the week, with premium rates still being the exception to the rule.

As the market braces for further General Rate Increases (GRIs) into August on the back of firmer demand as peak season rolls around, availability on vessels continues to remain tight.

"To be honest, all year has been peak season, those who are saying peak season is here must have been hibernating," a source at a logistics provider said.

However, they conceded that rates will likely rise in the short term before falling at the end of the third quarter, as the Chinese exporting market goes away for the Golden Week celebrations.

Despite this bearish outlook further out, there were some premium deals heard over the course of the week, with a shipper heard to have booked a container for a trip from North Asia to Antwerp at $28,000/FEU. This reflects a premium of 65% over the current FAK (Freight All Kind) price for Platts Container Rate 1 -- North Asia-to-North Continent -- which was assessed at $17,000/FEU July 30, but market sentiment is that this was a one-off deal and unlikely to be repeated.