Asia-US Container Rates See Modest Rebound

Spot rates on the Trans-Pacific route have signaled a return to growth; however, experts deem this increase insignificant compared to the 20-30% plunge seen last month, as oversupply continues to weigh heavily on the market.

container-ships

Container freight rates on the benchmark Eastbound Trans-Pacific route from Asia to the United States recorded an uptick over the past week. However, this gain is too modest to offset rates that remain 20% to 30% lower than in November.

Spot rates rose by 7%, or $140 per 40-foot equivalent unit (FEU). This is viewed as a short-term price recovery after the market bottomed out in late November.

Nonetheless, according to updates from analysts at Xeneta and eeSea, current rates remain 32% lower (a drop of $950/FEU) compared to early November, when the market was adjusting to previous shifts in supply capacity and demand.

Warning on Oversupply and Contract Negotiation Season

Assessing the current market landscape, Peter Sand, Chief Analyst at Xeneta, stated: “The backdrop is still one of oversupply compared to demand and that is seen clearly in the fact rates are still not back to where they were a month ago despite a fairly chunky increase in the past week.”

Sand also offered advice to shippers: “Shippers should reflect on this weaker market the next time a carrier asks for a general rate increase (GRI), because it would not appear to be justified against the level of demand versus capacity.”

Spot rates serve as a crucial indicator for aggregating rate indices as shippers and carriers prepare for contract negotiations, which are set to heat up in January.

Specific Developments on Both US Coasts

• West Coast: Offered capacity remained flat or dipped slightly by 1%, indicating no significant expansion of tonnage over the past week. However, compared to November, capacity has risen by 7% (equivalent to 20,000 TEU), leading to deeper price drops due to higher supply despite the recent modest recovery.

• East Coast: Weekly spot rates increased by approximately 8% ($220/FEU) as the Asia-US East Coast trade lane witnessed short-term firming. However, rates remain 21% lower ($750/FEU) than a month ago. A 3% capacity cut last week helped boost rates, but total supply remains 12% higher (around 20,000 TEU) compared to last month. Xeneta notes that this temporary stability contrasts with the reality of more vessels and lower rates.

Contrast on the Asia-Europe Route

The context is distinctly different on other trade lanes. Sand observed: “Far East to North Europe currently shows both demand and supply strength, carriers are adding capacity and rates are still edging up rather than softening.”

He noted that spot rate increases were even stronger on the Far East to Mediterranean route, with double-digit growth sustained over the past month as carriers cut capacity.

Sand also suggested that the Asia-Europe trade might be benefiting from developments surrounding the Red Sea - Suez Canal route: “This shows carriers are warming up for a return to the region, but there are a number of steps to go through before this happens at a large scale and transits remain at low numbers compared to before the Red Sea crisis escalated.”

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