China, South East Asian and Indian Subcontinent sea freight rates continue to rise

With strong demand and container shortages continuing throughout the Christmas and New Year period, sea freight rates from Asia have not softened and show little sign of easing before the Chinese New Year (CNY) holidays in February – at the earliest.

Consumer demand across Europe remains strong, with companies unable to restock in the face of this sustained demand and it will take some time to balance this out, which is why we may not see demand levelling off post-CNY. Maybe not until March, or even into the second quarter.

The China freight rate index, China Shanghai Containerised Freight Index, reported spot rates rising above $4,000 per TEU ($8182 a FFE) on the 31st December, equivalent to a 264% increase year over year and the highest we’ve seen quoted.

Anticipating a lull in demand, carriers typically announce blank sailings six to eight weeks before Chinese New Year. But so far only seven blank sailings have been announced on the Asia-Europe trade, over the three-week Chinese New Year period from the end of January, around 10% of capacity, compared with the 40% blanked last January.

Another major factor and influence, if not the most relevant, is that all carriers now have at best shortages of equipment and at worst no containers at all in many of the base ports throughout Asia. Regardless of the cost carriers physically cannot load product and several carriers have stopped offering services into the UK and Europe on their ad hoc spot platforms and are unable to perform their basic functions of shipping containers for contracted customers. This is creating a ‘pay to play’ market where containers, when they are available, are being auctioned to the highest bidder.

While there are reports in the press that some China factories will remain open to service backlogs of orders, we believe that they are more likely to close as normal for the public holidays and that the carriers actions are intended to rebalance container flows.

There is still a lot of catching up for China factories to do and it will be a while before their order backlogs are resolved and tight equipment availability remains a severe problem for the foreseeable.

Metro’s commercial experts monitor the container market from Asia continuously and are in constant contact with our origin teams for local assessments, so that they can react proactively to changing conditions and developments. We have a significant number of experts in Asia and UK operations managing shipments to consignment level with each now becoming a ‘project’ movement absorbing many hours of time.

While we may hope for more market stability this year, all the signs are that we will face another challenging time. Having closed off most of our contracts with partner carriers we are ahead of the market and well placed to deliver reliability and cost effective solutions based on a fixed validity pricing structure.

Protect your supply chain and budgets for 2021, by providing us with your forecasts now, so that we can secure you a deal for the year ahead, that has fixed validity and consistency in pricing.

Call Ian Barnes and/ or Grant Liddell to discuss the latest market situation and your plans for the year.