All-inclusive rates drop as shippers cut orders on Asia lockdowns

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Divergent fundamentals pushed all-inclusive rates from North Asia down as many Asian production hubs went into isolation over coronavirus outbreaks, while rates from Southeast Asian origins balanced higher as increased blanked sailings further limited supply.

The spot market continued to play at muted levels during the week to March 18 amid surging coronavirus cases in key Asian production hubs, and a resulting slowdown in export demand.

Liners were reported lowering rates to below the average Freight All Kinds, with little expectation for short-term increases, carrier sources reported.

During the week to March 18, S&P Global Commodity Insights heard bookings into the USWC at FAK levels, indicating demand had still not risen to pre-Lunar New Year levels.

On the East Coast market, premiums continued to balance at $1,000 to $2,000 above the spot assessment of $11,000/FEU. One offer from China to Savannah was heard at $12,500/FEU from a freight forwarder.

“Of course, the situation in Shenzhen will upset things again and the coming wave expected for next month so we will continue to ride this rollercoaster,” said one US-based freight forwarder.

Elsewhere in South America, carrier direct offers were heard at around $9,800/FEU into the Pacific Coast, and $9,200/FEU into the Atlantic Coast, indicating few bookings were made above FAK levels were on that lane.

Southeast Asian all-in rates jump on blank sailings, lockdowns

The all-inclusive premium rates were heard at $16,000-$18,000/FEU for Southeast Asia to East Coast North America and $15,000-$16,000/FEU for the West Coast, sources said. This was $1,000-$2,000/FEU higher than a week ago.

“The blank sailings in the last few weeks were hinting at weak demand but rates have started going up now due to increasing congestion after several lockdown restrictions were imposed in Shenzhen,” a freight forwarder based in China said.

According to the Maersk update published on March 16, terminals at main ports in Greater China Area remain operational with vessel operations, yard handling and gate-in and gate-out functioning normally. However, some warehouse in Shenzhen will remain closed from March 14 to 20 and some depots have also been shut from March 15 until further notice.

“Amid the COVID outbreak, freight forwarder and shippers have to look for alternative ports,” a source based in Singapore said. “When operations at Yantian are disrupted, they move to Nansha or Da Chan Bay or Shekou, which are still being operated, if Shanghai is closed, they have to look at Ningbo, which is always the case and vice-versa.”

Even if the ports start functioning normally, shortage of the truckers will be the biggest challenge as they must go through a lot of tests at different checkpoints which often deter them from returning to work, the source added.

The disruptions in China-Europe rail and air freight has aggravated the concerns of congestion and backlogs, causing the premium rates to go up, sources said.

Meanwhile, rising crude oil prices have also fueled concerns of increase in bunker fuel surcharges and thus the container freight.

“The rising bunker fuel costs may have a higher impact on the rates on short-haul routes than the long-haul since freight levels are already so high on the latter,” a source based in India said. “We expect additional bunker fuel surcharges in the coming weeks.”

Asia to Europe market continues to soften

Container rates from Asia to North Europe saw slight downside over the course of the week as cargo imports eased slightly, however the market remained largely in wait-and-see mode regarding the latest coronavirus outbreak in Shenzhen.

Despite this, rates from Asia to the Mediterranean strengthened on FAK basis, rising to $13,700/FEU, from $13,000/FEU a week earlier. This firming came as gaps opened up in some carriers’ schedules and demand began to rebound, resulting in premiums re-entering the market.

A premium of $15,216/FEU from a carrier was heard for securing a slot for prompt loading.

Source: Platts