Trans-Pacific westbound rates from Los Angeles to Shanghai rose in the week of July 4, their first increase in 10 weeks, according to the latest release of the World Container Index. Eastbound Europe-to-Asia rates weakened despite a proposed July 1 general rate increase.
Despite the fact that there were no GRIs scheduled for the westbound trans-Pacific lane, rates increased 6.5 percent or $55 per 40-foot container. “Generally, when we see a large price increase on a headhaul trade, we would also expect to see some level of price increases on the related backhaul, particularly in the case of the WCI where the backhaul route is for a main port. This is generally due to the level of demand for equipment in Asia and the fact that backhaul cargoes tend to require much greater freetime (both on and off quay) than headhaul cargoes,” said Richard Heath, director of World Container Index. The Asia-U.S. West Coast Shanghai Containerized Freight Index from the prior Friday, June 28, saw the trans-Pacific West Coast-bound rate achieve 67 percent of the proposed $400 GRI while the Drewry Hong Kong-Los Angeles Container Rate Benchmark from July 3 saw full achievement.
“When demand in Asia is higher, the larger the difference between the headhaul and backhaul rate the more incentive there is to relocate empty boxes which can be filled with a high paying cargo as soon as they are unloaded and shipped back than there is to ship loaded boxes which take 30 days to return to the port. In this situation, carriers will price backhaul routes higher because they can afford to carry a greater percentage of empties on the return leg,” Heath explained.
Prior to this increase, the westbound lane had fallen 16 percent or $161 during nine weeks. The current rate is 2.7 percent or $24 higher than it was at the beginning of the year but remains 1.2 percent lower year-over-year.
The Europe-to-Asia eastbound rate from Rotterdam to Shanghai fell 5.7 percent or $53 per FEU, putting it at $884. This lane saw no achievement of the proposed GRIs ranging from $200 to $300 per FEU proposed by Maersk, MSC and CMA CGM, set for July 1. This was the first time since June 2012 that rates fell below the $900-per-FEU mark. Rates declined in three of the past four weeks and fell a total of $56 since June 6. The current rate is down 5.6 percent or $52 since the beginning of the year and is down 12 percent year-over-year, the first negative year-over-year number since the JOC began collecting this data in June 2011.