Spot rates from China reach five figures – high street prices to rise, warning

Container spot rates saw another double-digit increase this week after a series of across-the-board rate hikes and other surcharges went into effect on June 1, a day or two after last week’s indices were released.

Drewry’s World Container Index (WCI) saw week-on-week gains of 14%, 17% and 11% on its Shanghai-Rotterdam, Shanghai-Genoa and Shanghai-Los Angeles routes.

Its value for the Asia-North Europe leg was $6,032 per 40ft, while Xeneta’s XSI spot rate index for the same route rose 18.5% to $5,647 per 40ft.

The WCI Shanghai-Genoa spot rate reached $6,664 per 40 feet.

The WCI Shanghai-Los Angeles leg was at $5,975 per 40 feet, while the Shanghai-New York spot rate rose 6% to $7,214 per 40 feet.

Transpacific XSI rose 19.5% to $5,859 per 40ft.

“Drewry expects freight rates from China to continue to rise next week due to the start of the early peak season,” the analyst said.

And European freight forwarders are warning that spot rates from Asia will cross five figures next month. One said Loadstar: “As expected, spot rates have been crossing the $10,000 per 40-foot mark since July 1, and several carriers’ online pricing platforms are already reflecting this.”

According to a company report BBC this week the rise in spot rates is starting to feed through to high street retail prices, driving them up.

Whether spot rates remain at this elevated level will most likely depend on how long demand persists.

“If the surge in demand is an early start to the peak season, we can expect pressure on the demand side to fade within a few months and sooner than usual,” said Freightos principal analyst Judah Levine.

“Just as rates climbed on a combination of Lunar New Year demand and limited capacity in the early months of the diversions and fell once demand eased, prices and disruptions should ease as the peak season slows this time, even if service resumes up to the Red Sea , we can expect rates not to fall below their April floor,” he added.

Unlike the former Asian routes, the Rotterdam-New York transatlantic main was down 4% week-over-week on the WCI to end the week at $2,136 per 40 feet.

Meanwhile, growing equipment shortages in Asian export hubs have led to a container price bubble, according to box trading platform Container xChange.

It said average container prices for a 40-foot unit at key Chinese ports rose 45% last month, from $2,240 in April to $3,250. Prices for similar units were around $1,698 in November, but $7,178 in September 2021, at the height of the Covid boom.

Container xChange founder and CEO Christian Roeloffs said the causes of higher container prices were the same as those that caused the recent rise in the spot freight rate, adding that they could fall just as quickly.

“As we closely monitor the market, it is clear that the current surge in container prices is not sustainable in the long term as it is not supported by strong underlying demand.

“Concerns about labor markets and high interest rates suggest that consumers are likely to cut back on spending, which could lead to lower demand for goods and, consequently, lower shipping volumes in the near term – unless the recovery in demand strengthens and the absorption of supply capacity intensifies.

“As the initial restocking rush subsides and real demand from consumers and businesses remains stable, we expect container prices to stabilize or even decline in the medium term; the market is showing signs of volatility driven by short-term factors rather than a sustained increase in demand,” he added.