Container lines have used general rate increases (GRIs) to forcibly push up Asia-U.S. spot rates, yet there’s widespread skepticism on rates’ staying power given the gravitational pull of weak demand.
Carriers introduced a round of GRIs on April 15 and are scheduled to implement the next round on May 1. But Linerlytica reported Monday that carriers are “already deferring the May 1 GRI” to mid-May because “cargo volumes are unable to support rate hikes despite the blank [canceled] sailings planned in early May.”
Spot rates have gone from highly loss-making to less loss-making. Jefferies shipping analyst Omar Nokta told FreightWaves that carrier breakeven rates on the trans-Pacific are “at least $2,000 [per forty-foot equivalent unit], likely in the $2,500 range” as a result of higher costs — above recently increased spot rates.
The Freightos Baltic Daily Index (FBX) China-West Coast index closed at $1,731 per FEU on Friday. That’s up 72% week on week (w/w). The FBX China-East Coast index was at $2,474 per FEU on Friday, up 19% w/w. FBX trans-Pacific indexes showed further gains on Monday. China-West Coast rates inched up to $1,737 per FEU. China-East Coast rates rose 4% versus Friday, to $2,564 per FEU.
The Drewry World Container Index (WCI) for Shanghai to Los Angeles rose 11% w/w to $1,856 per FEU for the week ending Thursday. The WCI Shanghai-to-New York index gained 12% to $2,849 per FEU.
These big double-digit gains sound impressive, but they’re off a very low base. Furthermore, cracks are already starting to appear in another indicator: the Shanghai Containerized Freight Index (SCFI).
SCFI’s latest trans-Pacific assessments fell 2% w/w, to $1,633 per FEU on the Asia-West Coast route and $2,510 per FEU on Asia-East Coast.
“No sooner had the trans-Pacific rates rebounded than the carriers started to cut rates again, in a pattern that will likely be repeated over the coming months,” said Linerlytica.
According to Jefferies’ analyst of Asian shipping, Andrew Lee, “Our view is that GRIs are unsustainable.” He expects GRIs will only be “partially successful … before the gains erode in the subsequent weeks.”
Platts said in its weekly freight report that “many market participants were skeptical that the increase would continue through the month due to lower consumer demand and weak economic sentiment.”