Asia-US container spot rates surge on Red Sea vessel diversions
The ongoing switch of container ships away from the Suez Canal to the longer route around southern Africa’s Cape of Good Hope has sent spot rates for Asia-to-US ocean freight surging to start 2024. The only potential relief in sight for shippers is whether vessel services can return to their regular routes such as the Panama Canal, which is allowing more ships to transit starting in January.
North Asia-to-US West Coast spot container rates rose 39% week on week to $2,612 per FEU as of Dec. 29, according to Platts, a sister company of the Journal of Commerce within S&P Global.
The spot rate bump comes on the heels of general rate increases (GRIs) that ocean carriers issued prior to Jan. 1. CMA CGM, Evergreen Marine, Hapag-Lloyd, Ocean Network Express (ONE), HMM and Yang Ming Lines have submitted notices that freight-all-kind (FAK) rates for the first half of January will be $2,700 per FEU from Asia to the US West Coast, according to a notice shared with the Journal of Commerce by a Shanghai-based freight consolidator.
Cosco Shipping’s FAK rate for January to the West Coast is at $2,800 per FEU, up from an earlier notice of an FAK rate of $2,500 in mid-December.
FAK rates to the US East and Gulf coasts, though, are seeing much wider dispersion, reflecting some of the continued uncertainty around schedules and routing. CMA CGM, Hapag-Lloyd and Evergreen have issued FAK rates of $3,900 to the East Coast.
Notices last week from ONE, HMM and Yang Ming put their FAK rate to the East Cost at $3,600 per FEU. Cosco’s last rate update shows a $4,300 FAK rate.
Those GRIs led to a 23% week-on-week surge in North Asia-US East Coast spot rates, which Platts assessed at $3,662 per FEU as of Dec. 29.
“If it keeps getting ugly, carriers will not lift contract freight when [FAK] rates are paying so much now,” a US-based agent for the freight consolidator said.
Jon Monroe, who serves as an advisor to non-vessel-operating common carriers (NVOs), said in his Jan. 1 newsletter to clients that FAK rates this week are in the range of $2,600 to $2,800 per FEU to the West Coast and $3,600 to $4,200 to the East Coast.
“The ocean carriers pulled their January quotes, and many forwarders pulled their quotes from their customers,” Monroe said. “The rate you might have thought you had for January will most likely not apply. Will the market take these increases? There may be little choice.”
Hapag-Lloyd says Red Sea ‘remains too dangerous’
Fast-rising rates are reflecting a slew of surcharges that ocean carriers are trying to pass on to shippers amid the ongoing vessel diversions around southern Africa. Most recently, Maersk said in a notice it has started adding a “transit disruption surcharge … for cargo diverted from Suez.” The surcharge is $400 per FEU from Asia to the US East Coast, Northwest Europe and Mediterranean.
Maersk said Tuesday that because of the weekend attacks on the Maersk Hangzhou as it transited the Red Sea, “we will continue to pause all cargo movement through the area while we further assess the constantly evolving situation.”
Even though a US-led multinational naval coalition is patrolling the Red Sea in a bid to deter attacks against commercial shipping by Houthi rebels based in southern Yemen, ocean carriers are still avoiding the Red Sea. Kuehne+Nagel said Tuesday that 330 ships totaling 4.5 million TEUs in capacity have been affected by the security issues in the Red Sea, either through diversions away from the area or delays in transiting the Suez while awaiting a naval escort.
Last week, Hapag-Lloyd said 120 vessels operated by THE Alliance or through other vessel-sharing agreements are rerouting via southern Africa. The carrier said the situation in the Red Sea “remains too dangerous to cross the Suez Canal and therefore we will maintain our diversion around the Cape of Good Hope.”
Hapag-Lloyd, though, will not have to divert as many ships from the Suez as it had originally planned. The carrier said Tuesday that three US East Coast services that were to be rerouted through the Suez Canal due to low water levels on the Panama Canal will instead transit the Panama Canal as planned.
The Panama Canal Authority (ACP) said last month it would increase the daily number of ship transits starting in January from 22 to 24 due to a better-than-expected supply of water available for the canal’s locks. The ACP had originally forecast that as few as 18 ships would be able to transit the canal in February, half the number it can regularly handle.
Source: Journal of Commerce
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