Trans-Pacific rates soar as carriers push for GRI and US trade policy uncertainty

Trans-Pacific rates surge as carriers hike rates and US trade policy uncertainty, Asia-Europe markets also see gains but sustainability remains unclear.

New-York-port

Port of New York & New Jersey (Photo: Port Authority of New York & New Jersey / Phaata)

Spot container rates on the Trans-Pacific trade route continued to record a double-digit weekly gain as carriers pushed up rates and the lull in the US-China trade war continued.

In Asia-Europe, gains were more modest, but forwarders remain skeptical about the strength of the gains as the market looks for signs of the start of the peak season.

The US Court of International Trade ruling that President Trump’s “reciprocal” tariffs were invalid came too late in the week to have a significant impact on rate indices. The previously announced 90-day tariff suspension is therefore likely to be the main reason for the firmness in freight rates this week.

However, the significant uncertainty surrounding US trade policy has certainly impacted rates on the Trans-Pacific: Drewry’s World Container Index (WCI) shows rates on the Shanghai-Los Angeles route rising 17% week-on-week to $3,788 per 40ft container, while Shanghai-New York is up 14% week-on-week to $5,172 per 40ft container.

While the WCI captures spot rates settled over the past seven days, the Shanghai Container Freight Index (SCFI) captures rates quoted over the past week, and often – though not always – correlates with the following week’s WCI.

If this holds true next week, Trans-Pacific shippers could face continued double-digit freight rate increases: last week’s SCFI index showed a 58% weekly increase on the Shanghai-to-US West Coast mainline, ending at $5,172 per 40-foot container, about $1,400 higher than WCI’s figure for the trade this week.

In addition, SCFI’s Shanghai-to-US East Coast mainline also increased 46% week-on-week to $6,243 per 40-foot container, $1,000 higher than WCI’s figure for the trade.

The surge in spot rates on the Trans-Pacific in the first week of June was understandable, as shipping lines announced general rate increases (GRIs) of between $1,000 and $3,000 per 40ft container, due to take effect on 1 June (Sunday).

Meanwhile, spot freight buyers from Asia in Northern Europe also faced higher rates this week, the first increase since early April, after WCI’s Shanghai-Rotterdam leg recorded a 6% increase from the previous week to $2,159 per 40ft container and a 3% increase on the Shanghai-Genoa leg to $2,939 per 40ft container.

And if the SCFI figures are accurate, the market could be facing higher rates next week, with Shanghai to North Europe up 20% week-on-week to $3,174/40ft container, and Shanghai to the Mediterranean up 31% to $6,122/40ft container.

It is possible that the SCFI figures reflect the new FAK (Fare for All Goods) rates that shipping lines announced for June 1, targeting $3,100-$3,300 for North Europe shipments and $4,400-$5,000 for Mediterranean shipments.

However, forwarders on the route expect the price hikes to be short-lived.

“We have seen rates jump from May into June; however, for Asia to North Europe, these rates are already being cut, and I expect further reductions,” a forwarder told The Loadstar.

“Some of the increase will stick, and stay above May rate levels, but not what we see right now and probably not where the carriers hoped to be. This seems more carriers trying to apply a rate increase in line with rates going up on the transpacific lanes to prevent further erosion,” the person said, adding that demand remains flat and vacancy levels remain normal.

“There’s no significant increase in demand yet, and bookings from Asia to Europe are so far going through without issue.”

However, another forwarder on the route noted that “carriers are telling us the large BCOs are peaking volume right now, plus, with their blanked sailings, the vessels are full – so there is definitely an element of peak season at play.” Zim has announced a peak season surcharge (PSS) of $1,400 per 40ft container for shipments from Asia to Europe from June 6, while CMA CGM plans to introduce a PSS of $1,000 per 40ft container for the Asia-Mediterranean trade from June 7.

See more: