Trans-Pacific Spot Rate Falls Below $1,000

Average spot rates by ocean carriers for a 40-foot container from Hong Kong to Los Angeles fell to $986 this week, down 51.6 percent from a year ago and the lowest level in a trans-Pacific downward pricing spiral, according to data compiled by Drewry Shipping Consultants in London for the weekly Container Rate Benchmark published by The Journal of Commerce.

The rate for the week starting May 11 compared to a spot rate of $2,036 per 40-foot container a year ago, and it was down 4.2 percent from $1,029 per FEU last week.

The weekly spot rate has gone down or stayed flat in every week since the first two weeks in August of last year, when it rose for two weeks in a row before flattening out again.

The trans-Pacific spot rate is the rate charged by carriers for containers that are not booked under their annual contracts with large shippers. The rate applies to containers booked for passage at the last moment.

When cargo volume is strong and space is tight as it was for six years until last year, shippers have to pay whatever the carriers can charge to get their cargo aboard a ship, but when volume is weak, as it has been for the last nine months, some shippers bet that the rates will fall and wait until the last moment to take advantage of the spot rate.

Shippers aren’t guaranteed space, but in the current environment, they are almost guaranteed low rates.

The effect of those low rates can be seen in the financial losses reported by most major carriers for the quarter ended March 31.

Contact Peter T. Leach at pleach@joc.com.