Trans-Pacific Freight Rate Volatility Intensifies Ahead of New Year

The Trans-Pacific container shipping market is navigating significant volatility in Q4, with freight rates to the US West Coast jumping 8%.

container-ship

According to the latest analysis from Freightos, the Trans-Pacific container market continued its volatile Q4 trend last week. Rates to the US West Coast rose 8%, or $200, to approximately $2,100/FEU (Forty-foot Equivalent Unit). This upward momentum was driven by carriers increasing blank sailings during the slack season to push through partial bi-weekly General Rate Increases (GRIs).

Conversely, rates to the US East Coast dipped 3% to around $3,000/FEU, although daily spot rates this week climbed by $300, currently exceeding $3,350.

Lunar New Year Impact and Capacity Management

In a note to clients, Judah Levine, Head of Research at Freightos, observed that while rates may experience short-term dips, expectations for a more sustained increase are building as the Lunar New Year (CNY) approaches. Despite recent fluctuations, carriers have successfully maintained remaining gains, keeping rates above the record lows recorded in early October.

Levine noted that "disciplined capacity management" on Asia-Europe lanes has pushed rates up for much of Q4. He also cited reports of increased demand as European importers kickstart pre-CNY orders early—ahead of Chinese factory closures for several weeks. This has boosted volumes, supporting the latest GRIs and even prompting some carriers to reinstate previously announced blank sailings.

Last week, Asia-North Europe rates surged 11% to over $2,700/FEU. Rates to the Mediterranean also saw a significant 15% jump to $3,850/FEU, with daily rates now exceeding $4,000. Both trade lanes have returned to price levels not seen since the summer.

Red Sea Risks and Reopening Scenarios

Similar to 2024, shippers are looking to build inventory now rather than waiting until after CNY, as continued carrier rerouting around the Red Sea implies longer transit times.

Although Maersk recently tested its first Red Sea transit in two years, and ONE expanded services there, barriers to a full-scale return remain. Houthi forces in Yemen issued a statement this week noting the failure of US military campaigns to break their shipping blockade in support of Palestinians in Gaza. They warned of further actions if the Gaza ceasefire is not upheld.

Analysts suggest a full reopening of the Red Sea could release a total of 2 million TEU of capacity back into the market. Levine predicts this would lead to significant vessel bunching and congestion at European hubs, potentially causing equipment shortages at Far East ports as carriers rush to turn vessels around.

Levine warned: “The shift back will be disruptive and cause delays and rate increases whenever it occurs, though the effect would be weaker if the return is in the low demand, spring months post-LNY and pre-peak season, and stronger if it coincides with peak season demand increases.”

Long-Term Supply and Demand Outlook

Looking at the broader picture, the Freightos expert analyzed: “Once that congestion unwinds though, the Red Sea return will increase the amount of capacity available in an already oversupplied market. New vessel deliveries will decrease in 2026 compared to 2025, but the impact of the increase in supply on rates – even if Red Sea diversions continue – will likely be significant nonetheless, with higher levels of newbuild deliveries set for 2027 and 2028..”

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