Spot rates in the eastbound Pacific began the new year maintaining levels above $1,200 per FEU to the West Coast and above $2,000 to the East Coast for the second straight week, providing carriers a stronger base to push rate hikes leading up to Chinese New Year on Feb. 16.
The spot rate for shipping a 40-foot container from Shanghai to the East Coast was $2,425, up 0.3 percent from the last week of 2017, but still below the 2017 peak-season rate of about $2,600. The West Coast rate was $1,465 per FEU, down 3.8 percent from last week, and down from the rate of about $1,600 in August during the 2017 peak- shipping season, according to the Shanghai Containerized Freight Index published on JOC.com’s Market Data Hub.
Many factories in Asia will close for a week or two beginning Feb. 16 for the annual Lunar New Year celebration. Importers in the United States and Europe in the coming weeks will ramp up their shipments and restock their inventories, hence spot rates are expected to remain relatively strong, or even increase, as the Lunar New Year approaches.
Indeed, a number of the major carriers in the Pacific have announced proposed rate hikes of $700 to as much as $1,000 per FEU, with some increases scheduled to take effect in mid-January and others on Feb. 1. Hapag-Lloyd intends to enhance the effectiveness of its rate hike by voiding some sailings as Feb. 16 approaches, according to the publication Splash 24/7.
Carriers the past two years have announced general rate increases (GRIs) on almost a monthly basis — without a great deal of success. They have achieved some increases, although less than what they announced, but the GRIs rarely lasted for more than a week before they rapidly deteriorated. Also, larger importers with “no GRI” clauses in their contracts normally do not experience a rate hike. Smaller shippers that book with non-vessel operating common carriers, known as freight forwarders in Europe, end up paying the higher rates.
Retail sales during the holidays increased more than 4 percent, which served to prop up import volumes and freight rates over the past month. This is reflected in the year-over-year spot rate comparisons. The East Coast spot rate this week declined only 4.6 percent from 2017 and the West Coast rate was 2.2 percent lower. Year- over-year comparisons in September to November had been lower by double digits because the 2017 rates were benchmarked off the rates in autumn 2016. Hanjin Shipping Co. filed for bankruptcy protection on Aug. 31, 2016, removing about 7 percent of total capacity in the Pacific. That caused spot rates in the autumn of 2016 to soar.
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