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CONTAINER PREMIUMS: Rates into US ease further as Chinese output slides

Highlights

China to North America premium rates dip with weaker factory output

Ex-Southeast Asia rates rebound as capacity pulled to China-US trade lanes

All-inclusive bookings levels from North Asia to North America lost support during the week to Oct. 22 as demand for trans-Pacific cargoes dampened.

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While US retailers are still busy restocking ahead of the year-end shopping season, supply chain and electricity cuts in China lowered factory output, sources said.

"On the demand side, we haven't seen the volumes where they were expected," a US-based freight forwarder said. "Demand has somewhat subdued ... a lot of this has to do with suppliers in China [who] have production and output issues."

S&P Global Platts this week heard all-inclusive rates from Chinese base ports to the US West Coast in the $12,000-$15,000/forty-foot equivalent unit range, for prompt loading.

One booking from China to the US Pacific Coast was heard at $11,800/FEU, a significant discount to all-inclusive rates on the same lane seen in recent months.

Sources expect rates to stabilize, or even increase, in November as large shippers engaging in another round of inventory replenishment are met with deteriorating congestion issues.

But for now, the spread between Freight All Kinds rates and all-inclusive rates has continued to narrow to as low as $3,000/FEU, down from highs of near $10,000/FEU earlier this year.

Ex-Southeast Asia rates rise as capacity deployed to China

Premium rates on the Southeast Asia-North America route registered increases this week but remained lower than the pre-Golden Week levels.

The all-inclusive premium rates from Southeast Asia to West Coast North America were largely heard between $15,000-$16,500/FEU this week after dipping as low as $9,000/FEU a week ago. For sailings to the US East Coast, rates were largely heard around $19,000-$20,000/FEU. The lowest price during the previous week was $13,000/FEU.

Premium rates were buoyed as factory production in Southeast Asia picked up momentum, but a sharp surge is unlikely as the quality of service remains subpar, a shipper based in Singapore said.

Many exporters are holding back their shipments due to the delays and rollovers. Even though premium surcharges do not ensure a smooth and timely service, FAK (Freight All Kind) rates are no longer attainable, the shipper said.

"The situation in Vietnam is very bad. Getting containers is very difficult, everybody wants containers in lots, schedules are the main concern, and even premium bookings are being rolled over," a freight-forwarder based in Vietnam said.

While demand in Vietnam is picking up after a prolonged period of lockdown restrictions, sources say that carriers are deploying maximum capacity from China, leaving the Southeast Asian exporter struggling for space.

Shippers in South Asia face a similar situation as rates on the South Asia to East Coast North America route rose to $19,000-$20,000/FEU against $16,000/FEU a week ago.

The premium surcharge on the route from India to the US has now increased to nearly $2,000-$3,000/container from $1,000-$1,500 last week, sources said.

Bearish sentiment hits Europe

Asia to Europe container rates saw little change on the week, as Chinese exporting demand again returned to the market, putting a dampener on the sentiment that rates would continue their downside over the course of the coming months.

As a result, while freight rates remain weaker than their start-of-month highs for the Asia to Europe trade lanes, they have seen little movement or downside over the course of the week, with shippers still paying FAK rates from Asia to Europe.

"Sentiment short-term is flat to the end of the year, barring any big issues such as port closures," said a UK-based freight forwarder.

Despite this, a bearish sentiment is creeping in for 2022 and further out as the logistics issues are expected to ease somewhat as demand continues to wane post-Christmas. Much of the demand has already been covered for this period.

Platts Container Rate 1 – North Asia-to-North Continent – was assessed unchanged on the week at $17,000/FEU on Oct. 22, while PCR11 – North Asia-to-UK – retained a premium of $1,500/FEU over rates to the European continent, settling at $18,500/FEU, also unchanged on the week.