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Respite in trans-Pacific premium rates could be short-lived

All-inclusive container shipping rates held steady in the week to Nov. 12 as carriers were reluctant to offer further discounts as demand remained strong and there were growing concerns about the supply of capacity and equipment in the December-January loading period.

Rates including premium service fees for the North Asia-to-West Coast North America route were heard in the $10,000-$12,000/FEU range, while premium rates from North Asia to East Coast North America were mostly in the $14,000-$16,000/FEU range.

But Freight All Kinds base rates without premiums from North Asia at $8,500/FEU to the West Coast and around $10,000/FEU to the East Coast were sometimes available for advance bookings this week. There were reports of a lull in demand for space on ships leaving China, while the Port of Los Angeles is forecasting import volumes in the week of Nov. 21-27 to fall 16% on a year-on-year basis.

“We have space nowadays. It seems some shippers can’t get their cargoes ready in time for export due to power shortages [in China] and a lack of [raw materials],” a Mexico-based freight forwarder said.

But omissions in calling on West Coast ports due to severe congestion rather than a lack of demand could again tighten carrying capacity for Asian exports to North America. Taiwan-based Wan Hai Lines announced this week it would withdraw capacity from its services to the US West Coast due to Los Angeles-Long Beach port congestion and reassign those ships to its core intra-Asia business, while shipping firms MSC, Maersk and Zim said previously they would omit calls at Seattle-Tacoma as terminals there have run out of space to unload cargoes.

“We’re seeing the worst traffic jam in history at LA-Long Beach,” a US-based freight forwarder said. “It’s only a matter of time now until we see the impact of those vessels not getting back to Asia and more blank sailings.”

There are also strong indications that major retailers are preparing to make a strong push to replenish their inventories in the December-January loading window, the freight forwarder added.

Southeast Asia still lacking ships and equipment

Although more carrying capacity from China was open for spot bookings, equipment availability was still a significant challenge around most of Southeast Asia and South Asia.

All-inclusive premium rates from Southeast Asia to East Coast North America were heard at $17,000-$19,000/FEU, down by around $1,000-$2,000/FEU from last week, while rates to West Coast North America were stable in the $15,000-$17,000/FEU range.

“On China-US, there is definitely a slowdown, it’s very evident in the price quotations we get,” a logistics provider based in Vietnam said. “Earlier there was a severe shortage and nobody was offering bookings, but now we keep getting low quotes. Even from Vietnam, some forwarders quote $15,000, in some cases even $12,000 per FEU for the US West Coast. There are a lot of sub-brokers in the market, who buy space from carriers and then sell it to other brokers and so on.”

A shipper based in Singapore said demand was easing because most exporters already placed bookings for the Christmas season.

“The congestion at Singapore port has eased off, mostly because vessels are stuck either in China or the US,” he said.

But demand is expected to pick up again over the next few weeks from a rush in cargoes ahead of the Lunar New Year holidays beginning Feb. 1. Power rationing in China is likely to continue throughout the northern winters, which raises the possibility of heavy cargo backlogs from February onwards.

“Even if prices start rising again, they will be lower than the pre-Golden Week levels because the supply chain situation is somewhat better now,” a trader based in Singapore said. The resolution of congestion at North American ports is the key to any recovery in the supply chain, he added.

Asia-to-Europe rates slide as demand cools

Container rates from Asia to Europe saw some downside over the course of the week, edging lower in what was a largely anticipated move following lower demand as the pre-Christmas demand spike eased.

Despite some slight cooling of rates, which have been at or near all-time high levels for much of 2021, delays for European bound cargo have continued to mount, with issues in the hinterland around truck and rail availability continuing to cause further congestion at ports.

“Falling rates doesn’t mean easing issues at this stage,” said a freight forwarder. “Delays are still rising.”

But unlike the trans-Pacific market, the outlook for Asia to Europe container rates in the December-January loading window remains bearish with further erosion of freight rates expected towards the end of the year.

Platts Container Rate 1 – North Asia-to-North Continent – fell $500 on the week to $16,500/FEU on Nov. 12.

Source: Platts

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