An outbreak of discipline among ocean carriers was the trigger for a 61 percent surge in spot freight rates on the Far East-Mediterranean route, according to industry consultant Drewry.
The jump in the average spot rate to ship a 40-foot container from Shanghai to Genoa, Italy, to over $2,200 in the first week of June from $1,413 in the previous week “appears to have been caused by ocean carrier behaviour rather than just fundamentals,” the London-based firm said.
The average spot rate retreated only $8 per 40 foot container in the following week ending June 13.
By contrast, spot rates on the Far East-North Europe trade are in free fall, sinking to $553 per 20-foot container from Shanghai to Rotterdam last week, from $1,300 a few weeks earlier, the steepest fall experienced by the industry.
“Market fundamentals, such as supply and demand, which normally play a major role in determining freight rate trends, are unlikely to have been the only factor behind the dramatic freight rate increase,” Drewry said.
Westbound ships are currently “far from full,” and there was even talk about the G6 alliance withdrawing a service to the Black Sea in May.
The carriers’ discipline, which drove the spot market rally, reflected the fact they needed to get spot rates above those offered to beneficial cargo owners, or run the risk of more BCOs seeking to renegotiate unfavorable annual rates. BCOs that sign quarterly and bi-annual ocean freight agreements also prefer to play the spot market much more after July 1.
Drewry said the dramatic rise in freight rates in early June “is unlikely to last long without carriers recognizing that average vessel utilization below 85 percent is not the end of the world.”
This followed June 1 rate hikes and peak-season surcharges between $500 and $750, reflecting the fact that the peak season arrived a month earlier than in northern Europe due to tourism.