Asia-Europe spot could exceed $20,000/FFE, says Sea-Intelligence

Spot rates continue to skyrocket and shippers are clearly getting anxious in relation to how high rates may go.

"The truth is, nobody really knows," says Alan Murphy, CEO, Sea-Intelligence in the latest update. "Simply put, prices will increase until sufficiently many shippers cannot afford to ship their goods. This will lower container demand to the point where it matches the available vessel capacity. But the actual level where this happens is not known.

"The easiest answer to how high can rates go would be to point to the maximum level seen during the pandemic. This, however, does not account for the increased round-Africa sailing distances that weren’t present during the pandemic."

To account for the longer sailing distances, we can look at the rates in relation to the distance sailed, i.e. U.S cents/FFE for each nautical mile sailed, the update added. "For the pandemic, this is shown in Figure 1. While Figure 1 is simply a display of historical fact, it also sets a precedent, which is that during times of severe distress, freight rates per nautical mile can reach these very high levels.

"If we extrapolate the data from Figure 1 as an indication of how high the market can indeed go based on the pandemic surge in rates, we can now apply the new (longer) sailing distances and calculate how high the spot rates per FFE could possibly go, if the current crisis persists.

"The result of this calculation is shown in Figure 2. And here we arrive at the scary scenario for shippers. If the rate paid per nautical mile reaches the same level as during the pandemic, we will see spot rates of $18,900/FFE from Shanghai to Rotterdam, $21,600/FFE from Shanghai to Genoaand $2,200/FFE on the back-haul from Rotterdam to Shanghai."

This, however, does not mean that the rates could not go any higher.."this is just to say that if rates per nm go as high as during the pandemic, then spot rates would go as high as shown in Figure 2."

U.S. importers caught in vicious circle
Threat of strike action at U.S. East and Gulf Coast ports may see importers accelerate efforts to protect ocean supply chains in a vicious circle of disruption in ocean freight container shipping, says the latest update from Xeneta.

“We have already seen shippers frontload imports ahead of the traditional peak season in Q3 due to concerns over the continuing supply chain impacts from the conflict in the Red Sea," says Peter Sand, Chief Analyst, Xeneta. "They may now accelerate this approach if there is a further risk of major disruption on the U.S. East and Gulf Coasts later this year.

“However, the frontloading of imports is part of a toxic cocktail of factors which has caused severe port congestion in Asia and Europe and the dramatic increases of more than $2,000 per FEU in ocean freight container shipping spot rates. It seems shippers are caught in a vicious circle where any action they take to protect their supply chains can result in making the situation worse."

Latest data from Xeneta shows average spot rates from the Far East to the U.S. East Coast have increased 64 percent since April 30 to $6,820/FFE on June 11.

If an agreement cannot be reached and strike action takes place when ocean freight container networks are still under extreme pressure, it could be a hugely difficult end to 2024, says Sand.

Los Angeles May volume down 3% YoY
The Port of Los Angeles processed 752,893 TEUs in May, a three percent decline over May 2023. Overall cargo volume remains 18 percent ahead of 2023 after five months, says an official update.

"May 2024 loaded imports landed at 390,663 TEUs, a 4.5 percent decline compared to the previous year. Loaded exports came in at 125,963 TEUs, an increase of 24 percent compared to last year. May marked the 12th consecutive month of year-over-year export gains."