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CONTAINER PREMIUMS: Trans-Pacific all-inclusive rates primed for rebound ahead of LNY

Highlights

Pre-holiday frontloading to pressure vessel space

Equipment issues in Asia keep box pool thin

All-inclusive container rates on the trans-Pacific route are set to jump again ahead of the Lunar New Year holiday in February as retailers engage additional inventory replenishment.

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Market sources expect a renewed flurry of booking activity beginning in late November and through December as US importers aim to beat the Lunar New Year production and export slowdown in China.

This is likely to lend further support to freight rates, which could result in a return of escalated premium levels seen during the August and September peak period.

One carrier source said that their volume expectations had increased for the November-January period and expects significant space premiums to begin during the week of Dec. 6.

"We're seeing quite some demand, particularly from big box retailers, who need to move cargos out before January," the source said. "They have asked us for large premium services which is putting pressure on space available."

During the week ending Nov. 19, S&P Global Platts heard all-inclusive premium bookings from North Asia to the USEC as high as $20,000/forty-foot equivalent unit, but most remained around the $14,000/FEU level.

Into the US Pacific Coast, rates remained steady at or just above $10,000/FEU, as more capacity relative to the Atlantic Coast kept a lid on rates.

"From here through Lunar New Year, space is going to remain tight, and there's not really going to be an opportunity for shippers to get lower rates, and a resumption of more bookings under the premium classification," a US-based freight forwarder told Platts. Rates have already begun to inch up, the source added, as carriers have begun to allocate less space on FAK and more on premium bases.

Vietnam equipment shortage supports SEA rates

Premium rates on the Southeast Asia-North America route were largely rangebound during the week ended Nov 18 as lower factory production in China has eased up the supply pressure. However, persistent equipment shortage in Vietnam prevented a fall.

The all-inclusive premium rates were heard around $17,000-$19,000/FEU for the East Coast and $13,000-$17,000/FEU for the West Coast.

The factory output in China has seen a decline due to electricity outages in the country as a measure to reduce power consumption. The power rationing and is likely to continue until early next year, sources said.

"Some exporters are also holding back their shipments to the West Coast because they are uncertain what new regulations Biden regime may bring in, " a freight-forwarder based in China said.

While shipments from South China are priced on the lower side, in Vietnam, the rates were high as carriers are blanking sailings to match demand in China, rather than diverting extra capacity to other regions, sources said.

"The way the carriers apportion the vessels is that majority of space is still given to the major ports in China. Vietnam just got back from a prolonged lockdown, so carriers are still concerned about deploying too much capacity there," a logistics provider based in Singapore said.

The slowdown in export volumes has also given a breather to the Chinese ports and the congestion issues are now receding.

"I don't think there is any significant congestion at the Chinese ports now," an NVOCC source said. "The situation was different in August and September but now the loading time has come down to 10-15 days and the situation is pretty comfortable," the source said, adding that no matter how much the port authorities talk about efficiency at Singapore port, it still remains congested.

Container throughput at Singapore port fell 8.1% year on year to 2.97 million TEUs in October, data released by Maritime and Port Authority of Singapore said. The volumes were also lower than 3.12 million TEUs in September.

"Singapore port may still have some congestion, but it's not as severe as before," a source there said. "Also, you see that even though the port Tuas is not fully operational yet, the PSA has opened up Tuas to accommodate some of the containers to release stress on the city terminal and the other terminals they have."

In the Indian market, premiums on containers destined to North America were erased by lower exports during the traditional offseason, sources said.

"The market is very open now with carriers finally releasing lot bookings, and premiums aren't required anymore to secure confirmed slots," a market source said.