Joseph Bonney | Feb 23, 2011 9:57AM EST
Spot rates on a key trans-Pacific container route dipped 6 percent this week, their second consecutive weekly decline since the Lunar New Year, amid signs of market instability, Drewry Shipping Consultants said.
Drewry’s container benchmark showed non-vessel-operating common carriers reported paying spot rates averaging $1,846 per 40-foot-equivalent unit from Hong Kong to Los Angeles during the week ending Feb. 21.
This week’s spot index was down 11.3 percent drop from the $2,081 level of Jan. 31, before Chinese factories closed for the Lunar New Year. Because of the holiday, the index was not published the week of Feb. 7.
The latest index was down 8.3 percent from a year earlier. Until Feb. 14, the Drewry trans-Pacific spot index had not shown a year-to-year decline since January 2010, when it turned upward after more than a year of declines during the recession.
Philip Damas, division director, liner shipping and supply chains, at Drewry Supply Chain Advisors, said the trans-Pacific market has shown instability after the Lunar New Year, although there were reports of an overspill of containers from some customers who couldn’t get space out of China before the holiday.
Damas noted that several new trans-Pacific services have been announced by established operators and newcomers to the trade. He said the trans-Pacific market faces “the prospect of unsustainable freight rates for carriers and a return to rate volatility for both shippers and carriers.”
Carriers note that spot rates account for less than 10 percent of trans-Pacific cargo, most of which moves under contracts. And during the week of March 1, 2009, the Drewry spot index posted a week-to-week decline of 7.5 percent, only to rise steadily as cargo demand increased during the annual peak season for U.S. imports.
Shippers and carriers, however, are closely watching container ship supply and demand as they enter negotiations for annual contracts that expire in May.
The Transpacific Stabilization Agreement said this month it expects Asia-to-U.S. volume to rise 7 to 8 percent this year, close to a forecast 8.8 percent rise in capacity. PIERS, a Journal of Commerce sister company, forecasts demand growth of about 9 percent.
Alphaliner forecasts 14 percent growth in container ship capacity. Paris-based SeaAxis, the marine container leasing unit of Axis Intermodal UK, said this week that rising capacity could cause global freight rates to fall 10 percent in the next quarter before recovering later this year.