Trans-Pacific Rates Down After New Year

According to the Shanghai Containerized Freight Index, the spot rate for shipping a 40-foot container (FEU) from Shanghai to the East Coast last week was $2,542, down 1 percent from $2,555 the previous week. The spot rate to the West Coast was $1,498 per FEU, down 2 percent from $1,518 the week before. The spot rate last week to the East Coast surged 76 percent from the previous week when the average spot rate was $1,448 per FEU. The spot rate to the West Coast last week increased 98 percent from the previous week, when it was at an all-time low of $766 per FEU.

Freight rates in the eastbound Pacific were under downward pressure for much of 2015 due to overcapacity in the trade. Carriers have been taking delivery of large, new, efficient vessels with lower operational costs. The problem is that capacity has been increasing much faster than cargo supply. In this type of environment, carriers make opportunistic moves when it appears there will be a spike in demand.

The Transpacific Stabilization Agreement, a discussion group of 15 of the largest carriers in the eastbound Pacific, therefore announced general rate increases to take effect on Jan. 1 for the pre-Chinese New Year rush. Many factories in Asia will shut down for two weeks or longer beginning Feb. 8 for the Lunar New Year celebrations. The factories in the weeks leading up to the celebrations rush to finalize their deliveries. Carriers during the next few weeks should therefore experience stronger-than-usual load factors. Once the final deliveries have been made, though, eastbound container volumes will plummet. Carriers can be expected in mid- to late February to cancel a number of sailings, and to send some vessels to drydock for annual maintenance. Even with the reduced capacity, spot freight rates should be lower during that period.