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CONTAINER PREMIUMS: North Asia-to-USWC rates lower as short-term capacity relieves supply shortfalls

Highlights

Small ship charterers provide capacity, rate windfall

Softening rates not expected to last into Q4

North Asia-to-US West Coast all-inclusive rates continued to edge down in the week ended Oct.8 as additional ship charterers entered the market, while Southeast Asia-to-US premiums rebounded.

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"Some carriers are offering lower rates to the US West Coast, but those could go back up in November," a US freight forwarder said. "Some alliance carriers are offering lower premiums because now they have to compete with charter vessels."

Other sources noted that the lion's share of additional capacity in the market is coming from niche liners, likely to be seen operating on the intra-Asia trade under normal conditions but brought to deep-sea trades on higher revenues.

These carriers, who may only offer a select number of sailings, prioritize high vessel utilization and prompt sailings, which allows for lower buy rates on the part of shippers.

"These are smaller Chinese carriers dipping into trans-Pac, these guys who came out with ad-hoc vessels," another freight forwarder said. "Intra-Asia carriers calling Southern California, with limited origin port pairs. A little bit of last-minute downward pressure on rates."

During the week, S&P Global Platts heard all-inclusive premium rates at $15,000 and below on a per FEU basis into the US Pacific Coast. This is down from rates nearing the $20,000/FEU level in the months leading up to the Chinese Golden Week holiday. One early September booking from Hong Kong into Los Angeles-Long Beach was heard at $21,000/FEU.

However, poor sentiment remains in the market for any easing of logistical issues, and most participants expect rates to firm up again in H2 October and November as last-minute holiday bookings are made.

Southeast Asia-to-US rates rebound

Premium rates on the Southeast Asia to North America routes made a swift recovery towards their pre–Chinese Golden Week holiday values, following what sources said was a one-off instance of a drop in prices as Chinese players rushed to sell off capacity at discounted rates before their holidays.

For Southeast Asia to West Coast North America, all-inclusive premium rates rebounded from the $11,500/FEU heard last week to their normal range of $16,000-$19,000/FEU.

While on the Southeast Asia to East Coast North America lane, the all-inclusive premium rates remained largely stable in the $20,000-$22,500/FEU range

"While the lower rates are logical considering the Golden Week holiday and the congested ports, we've not seen the rates drop or fluctuate much," a US-based importer said.

All-inclusive container rates from Indonesia were also heard higher during the week with premium rates for containers destined to East Coast North America heard at $21,550 per FEU and below, up from the $19,450 per FEU heard in September. For boxes travelling to the West Coast, premium prices were heard as high as $18,550 per FEU, up nearly $2,000 per unit from a month ago.

"These aren't all due to the general rate increases, but more so an impact of the Chinese Golden Week holiday and congestion at key ports increasing some structure rates like CUC, CCC and more for cargo moving to the USA," a logistics provider based in Indonesia said.

As China returns from Golden Week, market sources anticipate a rush of cargo with bookings leading up to the Chinese New Year on Feb. 1.

"Everything is being led by this crazy demand, and I can't see the carriers building their way out of this in the next 12 months," a logistics provider said. "It's going to take the shift in spending's from goods to services, and there is no clear idea on when that might be possible again."

Supply and demand rebalance pressures Europe rates

Some slight downside was seen for Asia-to-Europe container rates over the course of the week, as similarly to the trans-Pacific market extra supply and a slight easing in exporting demand during the Golden Week holiday left carriers and ports able to clear out some buildups of stocks around the world, easing the logistical constraints somewhat.

As with much of the last year, almost all business from Asia to Europe is being done on a FAK basis, rather than on the premium side, however it was these rates that took a slight hit this week, despite a largely bullish sentiment still dominating the market.

"Golden Week has just given ports a bit of time to recover - all eyes on new year for further downside, Chinese New Year is when we should see the wheels come off," said a freight forwarder. "Demand is falling slightly, everyone has already booked their Christmas goods so no reason to see further strength from here."

Platts Container Rate 1 – North Asia-to-North Continent – fell $250 on the week to $17,250/FEU on Oct. 8, the lowest since Aug. 31, however PCR11 – North Asia-to-UK – remained stable on the week at $18,500/FEU, widening its premium over the European market, as a lack of truck drivers continues to cause backlogs in UK ports and is resulting in significant disruption to internal UK supply chains. This has a knock-on effect meaning containers are taking longer to leave UK ports, thus there is a pile up and loading and discharge from container ships is also taking longer, resulting in a self-perpetuating cycle.