Shippers budgeting for a stiff increase in spot rates out of Asia in the rush to export orders before factories close for Lunar New year will be noting that with just two weeks to go there is still little upwards movement in prices on the trade from Asia to Europe.
China–North Europe rates could only manage a $5 or 0.5 percent increase this week to $912 per TEU, and rates on China-Mediterranean rose $25 or 3.2 percent per TEU to $797, according to the latest reading of the Shanghai Shipping Exchange’s SCFI.
The Lunar New Year falls on Feb. 16 and is usually accompanied by a spike in spot rates as volume increases in a short but sharp peak shipping period. So why are spot rates not rising sharply in keeping with tradition at this time of year?
One reason offered by Rod Riseborough, CEO of Container Trades Statistics, is available capacity. “Our figures show, at nominal capacities, that the capacity available on Far East–Europe in January 2018 was 12.8 percent higher than in January last year, so I would think there is enough capacity available to keep rates in check,” he said.
Another reason could be the lateness of Lunar New Year in 2018. In 2017, the Lunar New Year fell on Jan. 28, which condensed the period available to ship orders out of China before the factories closed. While the official holiday period is only three days, the reality is that factories begin to close in the week before Lunar New Year begins and can remain closed for three weeks afterwards.
Falling on Feb. 16 has given shippers almost six weeks since the western holidays ended to get shipments out of Asia, which may have distributed the increasing volume over a longer period, keeping a lid on rate rises.
However, the year-over-year comparisons are narrowing and the China–North Europe rate is now 12 percent lower than at the same point in 2017. The chart tracking rates at JOC.com’s Market Data Hub shows a steady, albeit incremental, growth in spot rates since mid-November. Spot rates to the Mediterranean are still around 20 percent down year over year, but have also been rising slowly after a spike at the end of December.
It is a different picture at the weekly Freightos index measuring FEU rate movements that is also tracked at the Market Data Hub. Freightos shows that at the beginning of this week (Jan. 28), spot rates were $1,540 per FEU, close to 30 percent below the price recorded at the same week last year. At $1,397 per FEU, rates on the Mediterranean trade were also 30 percent down year-over-year.
Drewry’s World Container Index found that spot rates on the Asia-Europe route also strengthened this week. Shanghai-Genoa gathered $107 to reach $1,634 per FEU, and Shanghai–Rotterdam gained $95 to reach $1,813 per FEU. The analyst said it expected the freight market to be “buoyant” until mid-February on the back of the pre-Lunar New Year volumes.
However, there was little buoyancy in the rate increases planned for Feb. 1. Increases announced on the Asia–North Europe trade were limited to just two carriers, with “K” Line wanting to reach $1,050 per TEU and and Hapag-Lloyd $1,100 per TEU. The spot rate only went up $5.
On Feb. 1 several Asia-Mediterranean carriers announced new rate levels but they will have been equally disappointed at the result. The FAK level, or freight-all-kinds, carriers wanted ranged from $1,050 by “K” Line to the West Mediterranean, to $1,150 by CMA CGM, also to the West Mediterranean, and to $1,500 per TEU sought by Hapag-Lloyd. If Hapag-Lloyd had been successful, it would have almost doubled the rate per 20-foot container and taken the Asia–Mediterranean rate to levels not seen in years.
A subdued pre-Lunar New Year is something that has also been experienced in the air cargo business. According to DHL Hong Kong Air Trade Leading Index’s first quarter report, shippers based in the huge air cargo market of Hong Kong are not predicting a surge in pre-Lunar New Year orders compared with last year. Instead, the shippers expect volume to rise sharply in the run up to Easter across all key markets.
Air freight rates out of China are also not yet showing any significant spikes, with Freightos reporting only modest increases in the past week. The online marketplace said two weeks ago China–Europe rates ranged between $2.20 and 3.50 per kilogram, but by last week had only risen slightly to $2.65 to $4.00 per kilogram.