Easing congestion brings Asia-Europe spot rates off the boil

Spot rates on the Asia-Europe trade lost further ground this week, in a sign that supply chain disruption could finally be easing on the east-west routing.

Cargo backlogs, port congestion and equipment shortages have caused havoc on deepsea routes since the end of the past year, driving freight rates to historical highs on numerous trades.

The post-Chinese New Year period, a notorious slack season for container shipping, was earmarked as an opportunity to readdress these supply chain imbalances.

Although Asia-Europe spot rates were largely unmoved in the immediate post-Chinese New Year period, developments in recent weeks point to the industry finally getting a grip of the situation.

The Shanghai Containerised Freight Index shows spot rates from China to northern Europe falling to $3,665 per teu, down 10.8% on its value heading into the Chinese New Year. During the same five-week period, China-Mediterranean spot rates have dropped back 8.9% to $3,901 per 20 ft unit.

An easing of congestion on the Asia-Europe trade has also been helped by weaker demand sentiment.

Recent reports have highlighted a significant downturn, suggesting a continuation of softening volume growth stated in the latest official figures by Container Trades Statistic for January.

The Shanghai Shipping Exchange, which publishes the weekly SCFI, noted this week that there were major improvements to overall supply chain efficiency on the trade, where advanced stock volumes have been cleared and capacity is now further aligned with demand.

With utilisation from Shanghai to European destinations at maximum capacity just a few weeks ago, the SSE services are now sailing at between 90%-95% full.

Despite spot rates showing signs of weakening, freight prices remain extraordinarily high. Asia-Europe rates are still three times higher than this time in the past year.

Pressure is being alleviated from supply chains, but the industry is still paying catching up and it could be some time yet until rates return to a ‘normal’ level.

While Asia-Europe spot rates are coming off the boil, transpacific rates remain resolute.

Since the Chinese New Year, the SCFI has gauged little movement in spot prices for cargoes to either the US west or east coast from the Far East.

At $3,984 per feu on the China-US west coast route this week, this is 0.4% higher than its level five weeks prior. Similarly, China-US east coast rates have fallen by a minimal 0.1% in the same period to its current level of $4,795 per feu. 

The SSE reports vessel utilisation is still at a maximum capacity amid unrelenting demand, spurred further in recent weeks by new US economic stimulus packages implemented by the Joe Biden administration.

This in turn has done little to take the strain off US port congestion or speed up the circulation of containers.

Until these issues are resolved, transpacific shippers will continue to pay a premium.