Look at Europe to know sea freight moves: Xeneta

Two weeks after it was reported that ocean freight shipping spot rates from the Far East into Europe may have peaked during the Red Sea crisis, it now appears trades into the U.S. have followed suit.

"For example, on January 1, 2024, spot rates from the Far East into Europe increased by more than 100 percent in what was the single biggest increase on these trades during the crisis. We then saw trades into the U.S. experience their biggest rise of this crisis 15 days later," says Xeneta in its latest update.

The US market is softeningSpot rates from the Far East into the U.S. have softened since the last round of GRIs were implemented at the start of February. Into the U.S. East Coast, rates have fallen slightly from $6,260 per FEU on February 1 to $6,100 on February 15. Rates into the West Coast have declined from $4,730 per FEU to $4,680 in the same period, the update added.

 "If the U.S. is lagging behind Europe by two weeks then that must mean… Yes, you’ve guessed it, spot rates from the Far East into Europe had already reached their peak 14 days earlier when the initial scramble to secure capacity in the run up to Lunar new Year had subsided. For example, spot rates from the Far East to Mediterranean have fallen by $510 per FEU from their peak of $6,020 on January 16."

Where Europe leads, others follow…
The ripple effect of the Red Sea crisis has been felt far and wide with spot rates increasing on trades around the world – and they are all moving with a lag relative to the Far East into Europe trades. Similarly, to the Far East to U.S. trades, their potential for further increases seems limited, the update added.

"Even with the longer sailing distances resulting from the trip around Africa to avoid The Suez Canal, there is still plenty of capacity in the market to meet the additional TEU-mile demand and this appears to be being borne out in the flattening of spot rates on major trades."

TEU*Miles to go up 16%
In 2023, global TEU*Miles were 860 billion, according to the latest update from Sea-Intelligence. "Since we are trying to gauge the impact of the Red Sea crisis versus a normal situation, moving the same amount of cargo globally in 2024 but with a diversion around COGH, would result in a demand of 994 billion TEU*Miles. This equates to an increase of 16 percent."

The 16 percent increase in global TEU*Miles, in turn, means that the need for capacity also increases by 16 percent, the update added. "This can be accommodated by the carriers through two mechanisms: the first is by absorbing the current significant overcapacity, which will become worse as more capacity is delivered during 2024. The second is by speeding up vessels to allow the same amount of vessel capacity to deliver more TEU*Miles per year. At present, both mechanisms are at play. It should be expected that during 2024, the continued injection of more capacity will likely be used to slow the existing vessels down somewhat."