Spot rates for shipping containers from Asia to the United States fell in the week ended Dec. 11, according to Xeneta data. The supply-demand imbalance is driving down container prices on US trade routes as ocean carriers deploy more vessels in the soft market.
Also Read: US Container Imports Fall in November Amid Seasonal Decline and Weakening Chinese Imports
Rates from Asia to the US West Coast fell 2%, or $33 per forty-foot equivalent unit (FEU), to $1,861 per FEU. Short-term pricing looks softer after the previous pullback. Rates are down nearly 22%, or $511 per FEU, month-over-month since Nov. 11, “showing how much power carriers have reduced pricing over the period.”
On the Asia-US East Coast route, weekly rates fell 1.5%, or $41 per FEU, to $2,709 per FEU. Despite small weekly changes, as of November 11, rates have fallen to 9% or $257 per FEU.
“Looking at the fundamentals of supply and demand in major deals right now, but that’s not happening, so something has to give,” said Peter Sand, senior analyst at Xeneta. Although capacity on offer is increasing, spot rates are relatively stable, particularly from the Far East to the US East Coast, Northern Europe and the Mediterranean.
“Telecoms will try to increase rate hikes in mid-December – and we may see a slight increase – but this will not last long due to downward pressure from increased supply. The impact of higher supply will be felt most strongly on US pre-sales where demand is not strong compared to business in Europe,” Sund added.
Capacity increases on key routes
Capacity for the Asia-US West Coast rose 1.7%, or 5,300 twenty-foot equivalent units (TEU), in the latest week, with no sign of a slowdown in supply. Month-on-month capacity was slightly higher by 0.4 percent or 1,300 TEU. Xeneta said carriers will benefit from a more stable and increased supply amid sharply lower rates.
On the Asia-US East Coast service, capacity was up 10% week-on-week to 17,400 TEUs, reflecting “decisive” upside and downward pressure on spot prices. Month-on-month capacity increased by 16% to 26,300 TEU.
A transit of the Red Sea adds to the downward pressure
“There are increasing signs of a gradual return of container ships to the Red Sea region, most recently highlighted by the CMA CGM Indamex service now transiting the Suez Canal on both forward and reverse voyages,” Sand said. “This will only add to the downward pressure on rates, particularly on trade from the Far East to the East Coast of the US and Europe that pass through the Suez Canal.”
Analysts estimate that the annual capacity of 2 million TEUs will return to the Red Sea-Suez Canal route after a period of transition – when and if the major carriers decide to rearrange the turns.
Stability of the transatlantic market
Average spot market rates since Dec. 11 for Northern Europe to the US East Coast were flat last week at $1,571 per FEU, down just 0.1%, or $2 per FEU as capacity fell 0.7% from last week. For the month, rates rose 0.3%, or $5 per FEU, avoiding the swings seen in the Pacific. Capacity was down about 0.7%, or 400 TEU, while monthly levels fell 6%-7%, or 3,600 TEU, as carriers reduced space from mid-November. Rates have been stable as the supply/demand balance improves.
Source: IndexBox Market Intelligence Platform
About the Author
