Long-term container freight rates increase on major routes

Long-term freight rates, particularly on the route between the Far East and the United States, have skyrocketed, following developments in short-term contracts, which have seen increases in rates to the United States (both seashore) faster than the increase in spot rates to Europe.

“Long term rates into the US West Coast were the first to experience a jump, following a long period of slightly declining rates. Between 30 September and 1 October, the long term rates rose to $2,052 per feu from $1,496, equivalent to a 37.2% jump. They have since fallen to $2,014 per feu on 13 October. This is however still 44.1% higher than the rate on the same day last year ($1,398 per feu)”, Peter Sand said the head of shipping analysis at Bimco.

“Long term rates between the Far East and the US East Coast experienced an even stronger increase than those into the West Coast, with rates increasing by $721 per feu; from $2,412 per feu on 30 September to $3,133 per feu on 1 October. Once again, long term rates have since declined, but at $3,207 per feu, they are still 25.7% higher than on the corresponding day in 2019 ”Sand wrote.

After retail sales fell nearly 15% in April as a result of the Corona (Covid-19) virus blockade measures in the US, retail sales have since shown resilience. After the first eight months of the year, retail sales are now up 0.9% year-on-year.

“The robust demand for goods means that container shipping has been less affected than overall growth figures would suggest, as the industries suffering the most are less reliant on trade. Container shipping into the US has been less affected than what overall growth rates would suggest, as many of the hardest hit sectors (eg, services) are less reliant on trade, than retail sales which have proven quite resilient”, Sand explained.

He added: “Furthermore, the decline in imports in the first half of the year mean inventories need restocking and importers may be looking to frontload stock ahead of more potential disruption to supply chains from a second wave of Covid-19 cases".

As is the case with lower spot rate increases on routes between the Far East and Europe, so do long-term rates. Unlike the US counterparts that increased US $ 721 / FEU and US $ 556 / FEU, long-term rates to Northern Europe from Asia experienced less and gradual increases. They currently stand at $ 1,600 per FEU, which is $ 173 more than September 30.

The recovery in volumes has weakened compared with the recovery of the shipping service from the Far East to North America. Cumulative volumes between the Far East and Europe decreased by 10.3% in the first eight months of the year, down 1.2 million TEUs from the same period in 2019.

Phaata (Source: Seatrade-Maritime)