Sea-Intelligence: Asia-Europe spot could exceed 20,000 US$/FFE

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As spot rates continue to skyrocket, Alan Murphy, CEO of Sea-Intelligence, says it will boil down to lowering container demand until it matches available vessel capacity. But the actual level where this happens is not known.

Spot rates in the container shipping industry have continued their upward trajectory, prompting growing concerns among shippers about the extent of future increases. Analysts acknowledge that while prices are climbing steadily, the ultimate ceiling remains uncertain.

“Simply put, prices will rise until enough shippers find shipping costs prohibitive,” says Alan Murphy, CEO of Sea-Intelligence, a maritime analytics firm.

This will lower container demand, to the point where it matches the available vessel capacity. But the actual level where this happens is not known. The easiest answer to ‘how high can rates go?’ would be to point to the maximum level seen during the pandemic. This, however, does not account for the increased round-Africa sailing distances that weren’t present during the pandemic.”

According to Sea-Intelligence, Asia-Europe spot rates could exceed US$ 20,000 per forty-foot container (FFE).

“If the rate paid per nautical mile reaches the same level as during the pandemic, we will see spot rates of 18,900 USD/FFE from Shanghai to Rotterdam, 21,600 USD/FFE from Shanghai to Genoa, and 2,200 USD/FFE on the back-haul from Rotterdam to Shanghai,” Murphy added.

On the other hand, Xeneta, an ocean and freight rate benchmarking and intelligence platform, said last week that spot rates on major trades out of the Far East were poised to increase again in mid-June, but to a less dramatic extent than witnessed in May and early June.

Xeneta’s increase projection for June 15 said that the average spot rates would reach:

  • Far East to US West Coast US$6,178 per FFE
  •  Far East into the US East Coast US$7,114 per FFE
  • Far East to North Europe US$6,357 per FFE
  • Far East into the Mediterranean US$7,048 per FFE.

“Any sign of a slowing in the growth of spot rates will be welcomed by shippers, but this is an extremely challenging situation and it is likely to remain so,” says Peter Sand, Xeneta’s Chief Analyst.

“The market is still rising and some shippers are still facing the prospect of not being able to ship containers on existing long term contracts and having their cargo rolled.”

“Compared to mid-December last year before the outbreak of conflict in the Red Sea, average spot rates from the Far East are up 276% into the US West Coast and 316% into North Europe – these are huge financial hits for shippers to absorb,” Sand said.

“With the ongoing conflict in the Red Sea region, congestion at ports in the Mediterranean and Asia, equipment shortages and shippers frontloading imports ahead of the Q3 peak season, the pressure within the ocean freight container shipping system is still at severe levels.

“The breakdown of labour negotiations and the threat of union action at US East Coast and Gulf Coast ports will add even more pressure and move the needle further into the red.

“We must also consider the potential impact spiralling ocean freight container shipping spot rates can have on inflation in the US and Europe if these increasing costs are ultimately passed on to the end consumers.

“At the moment it is unlikely – but not impossible – that spot rates will reach the levels seen during the Covid-19 pandemic but there are so many factors in play it is not possible to predict the market with any degree of certainty.

“For example, any potential ceasefire between Israel and Hamas could change the picture completely if it helps to end attacks on container ships by Houthi militia and see a large-scale return of carriers to the Red Sea region.”

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