Drewry’s Hong Kong-Los Angeles Container Rate Benchmark increased $400 in the week of July 3, according to the latest release of the Drewry Hong Kong-Los Angeles Container Rate Benchmark. “The $400 per 40-foot container general rate increase recommended by the Transpacific Stabilization Agreement for July 1 was fully accepted by the market,” Drewry said in its latest release. Hapag-Lloyd, OOCL and Cosco took part in the GRI.
The trans-Pacific spot rate soared roughly 22 percent from June 26 to $2,236 per FEU, its highest rate in 12 weeks. This benchmark has not seen an increase since the week of May 22 and has not increased by $400 or more per FEU since early August 2012. This week’s rate is down 11 percent year-over-year, but up 1 percent or $22 from the beginning of 2013.
“Drewry expects this gain to erode in the coming weeks leading up to (an Aug. 1 peak-season surcharge) as excess capacity weighs on rates,” Drewry added in its release.
Jefferies shipping analyst Johnson Leung also sees the increases as unsustainable, explaining, “We are starting to view most of these vertical movements in spot freight rates as bubbles because a proper up-cycle in freight rates is usually a more gradual upward slope that is constantly tested and confirmed, like most of the other price charts. The downward slope of spot rates following those sharp rises in the past 15 months looks more natural and agreeable with fundamental demand-supply forces in the market, in our view. However, we are likely to see a substantial pull-back in spot freight rates as there is little support from utilization.”
The Asia-U.S. West Coast Shanghai Containerized Freight Index also jumped in response to the July 1 GRI, however it did not show as much achievement as the Drewry benchmark. In the week ending June 28, prior to the GRI increase, the trans-Pacific West Coast-bound rate increased 14.6 percent, or $269, to $2,114 per FEU, achieving 67 percent of the GRI.