Spot rates for containerized ocean freight have climbed across three leading Far East export corridors after the latest round of General Rate Increases (GRIs) from carriers.
The news from Oslo's Xeneta is a welcome relief for the struggling shipping industry, which has been facing declining demand, overcapacity, and economic uncertainty.
The ocean and air freight rate benchmarking and market analytics platform noted that spot rates are now back above long-term contracted rates on all three routes, giving shippers, freight forwarders and carriers much to ponder ahead of upcoming peak season contract tenders.
Fighting for control
"We've grown accustomed to witnessing a protracted downward trajectory for ocean freight rates since last summer," said Peter Sand, chief analyst, Xeneta, "with spot rates falling below-contracted rates on key routes as carriers fight for volumes in a climate defined by weak demand."
Sand added that GRIs have been deployed time and time again by the carriers to try and 'right the ship', arresting declines and allowing them to regain a sense of control.
"However, as we've seen across the majority of lanes this year, that's failed to have the desired impact… until now," he added.
Steady increase
Xeneta's real-time data, crowd-sourced from leading global shippers, shows that August's GRIs have helped rates rally on the crucial Far East to US West Coast, Far East to North Europe, and Far East to Mediterranean corridors.
The Far East to North Europe trade lane has experienced the most dramatic short-term climb (from the end of July), rising US$500 from a spot rate that has been sub-US$1500 per FEU since early May — which amounts to a 39.6% hike.
Xeneta said this has also pushed the spread between this route and the more expensive Far East to Mediterranean lane down to just US$670 — the closest it's been this year.
Meanwhile, the Far East to US West Coast corridor has enjoyed a somewhat steadier rise with more impactful GRIs over recent months.
Market average spot rates here have climbed by 51.5% since the end of June, increasing by US$470 from July 1 to August 1.
"With many carriers looking for GRI-driven increases in the range of US$1000 per FEU, these 'bumps' fall far short but, given the recent industry context, will no doubt be welcomed by carriers nonetheless," Sand said.
"It's also important to note that the climbs come ahead of peak season and a new wave of contract tendering. Of course, whether the increases hold in an atmosphere of weak fundamentals remains to be seen — they certainly haven't done so earlier this year, but then we haven’t seen climbs as pronounced as this either," he added.
Certain uncertainty
Sand concludes that much will hinge on whether these short-term boosts translate into lasting gains and how that plays into the next set of GRIs in September.
"One thing's for sure," the Xeneta chief analyst said. "Many of the shippers who have been taking advantage of the weak short-term market and delaying signing new long-term contracts will be eyeing developments nervously. Have they left it 'too late' to negotiate? Has the market bottomed out before a rebound? Or is this simply a false dawn for carriers?"
"Time and analysis of the latest data will tell," Sand said.
