The liner trade could be in for more pain this week as the weeks-long plunge of freight rates on major lanes continues unabated, with the spot price for 40-foot containers nosediving sharply compared with where the rate was at a year ago.
To put that into perspective, this time last year it would have cost about US$20 000 to send an FEU from a West Coast US port to Asia.
Towards the end of last week though, Freightos Baltic Index (FBI) listed the container price for a 40-footer at $2 361.
What’s even more alarming is that more than 66% of that plunge occurred over the last four to five months, ever since dwindling demand started rippling out across the freight sector.
At the end of September, it was reported that a 31 consecutive week decline had resulted in a 61% year-on-year (y-o-y) decrease.
That was according to y-o-y data measured by supply chain advisory Drewry’s World Container Index.
The decline, then, drove FEU spot prices on Trans-Pacific freight down 10% to $4 014.
Now, with the Christmas season fast approaching, the cascading effect of FEU spot prices is expected to continue, despite demand being expected to increase.
If rates continue to decrease as steeply as they are, Trans-Pacific 40-foot rates could drop below $2000 per box at the end of this week.
Such is the situation at the moment that contract clients, locked into pricey beneficial cargo owner (BCO) arrangements, are apparently being given a reprieve by lines shipping spot freight for about a quarter of the BCO rate.
The current situation is a far cry from where rates were at the beginning of the year, when lines were charging top dollar, leading some like Maersk and Hapag-Lloyd to shift the lion’s share of allocation over to BCO business*.
In what seems to have been prophetic admonitions, freight forwarders warned lines not to shut out ad hoc shippers for the sake of longer-term business from large retailing concerns.
However, it’s reported out of London this morning that, despite the blood-letting on Trans-Pacific trade – amounting to a 70% drop in prices – spot rates are still holding firm on certain lanes, especially in Northern Europe and on transatlantic rotations.
Compared with the rapidly decreasing FEU rate for Trans-Pacific trade, the transatlantic spot price for a 40-foot box is $7 500.
And on Northern Europe lanes the rate is still about 50% higher than it was during the Covid-19 pandemic.
* Read this for context: https://tinyurl.com/4vw7xr2b
