Date: 10.07.2024

Peak season impact on container freight rates

The last week of June saw further gains on sea freight spot rates from Asia into Europe and North America, as a series of peak season surcharges (PSS) were imposed and new FAK levels from 1st July creating double-digit increases in spot freight rates.

With spot and FAK rates across all three carrier alliances approaching five figures, analysts predict that if the peak season extends into the traditional August/September period, 40ft spot rates could rise to $14,000-$15,000. And possibly higher, with a much longer application than originally anticipated into 2025.

Surcharges Affecting Asia-North Europe Trade
Along with other carriers CMA CGM has imposed a $1,500 PSS on Oceania-North Europe shipments and a $500 emergency space surcharge per box on India-North Europe shipments. Similarly, Hapag-Lloyd will implement a $1,000 per 40ft PSS on the Far East-India trade.

Spot Rate Indices and Transpacific Route Increases
Drewry’s World Container Index (WCI) composite index grew by 12% last week, with the Shanghai-New York leg showing the steepest growth at 17%. Similarly, the Shanghai-Rotterdam spot rate increased by 10%. Shippers on transpacific routes could see further double-digit rate jumps next week, with CMA CGM set to implement a $2,400 per 40ft PSS on all shipments from Asia to the US starting Monday.

As always. Metro are working tirelessly to mitigate the impact of these increases on our customers.

Space Shortages, Elevated Rates, and Container Equipment Shortages
Due to strong demand, many shippers are paying above quoted rates to secure space. Space availability from Asia to Europe has dropped by 30%-40%, leading major importers to pay space guarantee surcharges.

Higher rates are expected to persist until Golden Week, with some Asia-North Europe spot rates already breaching five figures. An early peak season, lasting until Golden Week in October, driven by importers’ determination to avoid Christmas stock shortages, indicates strong orders lasting at least until then. Should the peak extend, the market may not significantly decline until Q2 next year, even with additional capacity coming in.

Additionally, container equipment shortages are becoming more prevalent, with average container prices in China reaching their highest level in two years, and leasing rates on China-Europe routes tripling.

Ports are becoming congested globally – on all continents. The outcome of this is increased port blanking’s or sliding’s. These can be voluntary by the carriers, but more often than not are now involuntary and caused through long waits outside the port and an inability to discharge vessels, without having a major impact on their schedules.

The result is, whether you are on contract, spot or FAK pricing – if a vessel doesn’t call at the port,  you will not get your product moved until the next one does. And then, when the following vessel from whichever alliance does call, you do not get any retrospective protection on capacity that is simply ‘lost’.

Every importer and shipper who trades with China and Asia on a wider scale is being affected – it is impossible in the current and short term market to avoid the disruption.

In summary, spot rates show substantial growth, with space shortages increasing and elevated rates likely to persist until at least Golden Week, compounded by container equipment shortages and rising costs.

These trends suggest continued high rates and strong demand well into next year. However, we will continue to mitigate these costs where we can, but in a market where $10,000 + a FEU is becoming normality we will always endeavour through our pricing mechanisms and thoughtful considered approach to ensure that you receive the best pricing and reliability of service available in the market.

We will continue to communicate this to you daily/weekly/monthly, and as frequently and for as long as we need to, until the market settles.

We see challenges as opportunities to shine, and deliver a collaborative market-leading solution, that is appropriate for your business and tailored to your expectations.

With carriers in the ‘driving seat’, they are cherry-picking which contracts to honour, rolling lower-yield containers and blanking vessels, to try and recover schedules.

With the market this challenging, there is no ’silver bullet’ and many shippers that try to play the spot market are coming unstuck.

Metro are leveraging our long-standing carrier relationships and sensible annual contracts, to secure our customers space and set rates.

To learn how we can enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith.