Shipping lines still have the upper hand with sky-high spot rates

The Shanghai Containerised Freight Index (SCFI) on October 23 showed that the carriers continued to dominate when the annual contract negotiations on Asia-Europe services ended. 

SCFI's Shanghai-North Europe service rose $16/TEU to end the week at $1,100/TEU, while the Shanghai-Mediterranean service rose $22/TEU to $1,261/TEU.

The difference from 12 months ago was marked: spot rates in North Europe today are up 85% from last year, while prices at Mediterranean ports are up 77%.

The continued strength of spot rates is almost certainly related to both the shortage of equipment in China and the tight capacity of shipping vessels.

"In the Europe and Mediterranean routes, there is a serious shortage of containers in the market, the actual available capacity is reduced and the space is tight," explained analysts at the Ningbo Shipping Exchange.

And while shippers and their forwarding companies have reported strong demand during what has become an extended peak season, the numbers themselves are somewhat skewed. Drewry released its Container Port Indices on October 23 for through August throughput, showing that throughput at world container ports has nearly recovered to pre-Covid levels, but remains lower 1.1% in August 2019.

In addition, Drewry notes that throughput at European container ports in August fell 1% in July and decreased 9% in August 2019.

"With a second wave of Covid-19 taking hold across the region, the prospects for recovery seem bleak," said Drewry.

However, carriers continue to hide the possibility of redundancy - according to the eeSea liner database, about 13 of the 97 scheduled Asia-Europe sailings this month will be canceled, meaning is the actual capacity will be 87% of the original capacity.

Over the next month, four out of 81 sailings so far have been announced as cancellations, with current projected capacity equal to 94 percent of original capacity.

Hapag-Lloyd announced on October 23 the FAK rates for the Asia-North Europe region were $1,100/TEU and $1,210/TEU for the western Mediterranean ports.

Last week, CMA CGM announced a $150/TEU peak season surcharge (PSS) from 1 November for all shipments from Asia to Northern Europe, and this week announced PSS on the reverse service. from Northern Europe to Asia is USD 100/Container from 15 November.

On the trans-Pacific services, there is a similar picture as carriers maintain their recent increases. Shipping service to the west coast of the United States increased by USD 24 per 40ft container, to USD 3,865/FEU and by USD 6, to USD 4,625/FEU on the service to the East Coast of the United States. This represents an annual increase of 184% and 92%, respectively. 

Phaata (Source: Adapted from Gavin van Marle - The Loadstar)