In response to an anticipated early surge in demand ahead of the Chinese New Year, spot rates are experiencing fluctuations. MSC has declared a rate increase for November on the Asia-Europe route. This adjustment comes as the industry observes a decrease in volumes for October and November, traditionally the peak season, leading to a reduction in average spot freight rates on the Transpacific route. Xeneta reports a drop from US$8.023/FEU in early July to US$5.401/FEU by October's end. The Freightos Baltic Index (FBX) highlights a 35% decrease in spot rates to the US West Coast and a 38% decrease to the US East Coast since July, as detailed by MundoMaritimo.
Shipping lines have increased capacity on the Transpacific route by 19% from the second to the third quarter of 2024 and by 17% from the third quarter of 2023, as per Sea-Intelligence. This capacity expansion, coupled with reduced volumes, contributes to the declining rates. Despite some announced itinerary cancellations, November's capacity on the route remains largely unchanged, potentially perpetuating the downward trend in rates. Freightos' Judah Levine points out that despite lower demand and projections, rates on the Trans-Pacific route remain substantially higher than during the previous Red Sea crisis in April.
US importers face several considerations in the upcoming months, including the presidential election and potential new tariffs on imports from China. Additionally, the possibility of strikes at US East and Gulf Coast ports in January could impact West Coast ports as well.
On the Asia-Europe route, the FBX indicates a 60% reduction in spot freight rates compared to July's peak, with rates now close to the April low. Asia-Mediterranean rates have decreased by 3% from the previous week, 50% lower than July's peak. Despite these reductions, rates remain significantly above the previous year's levels due to capacity losses from Red Sea diversions. Shipping lines are increasing itinerary cancellations (blank sailing) on the Asia-Europe route to mitigate the rate decline. However, with early demand for the Chinese New Year and congestion at key ports, there is an expectation of rate recovery. MSC's announced General Rate Increase (GRI) for November aims to elevate Asia-Europe rates to US$5.000/FEU, with similar actions anticipated from other carriers.
Source: Blueberries Consulting