Drewry has reported unprecedented transpacific spot freight rates that signals a transformation of the container shipping sector may be underway and that shippers need to adapt.
Eastbound spot container freight rates have exceed previous historical highs by 40% since the beginning of the COVID-19 outbreak.
The current reading for the Drewry Hong Kong-Los Angeles spot freight rate benchmark ($/40ft container), the first spot rate index tracked in the container shipping industry, topped the previous record ($2,880 in 2012) by $1,201/40ft box, broke the $4,000 threshold and reached a 15-year high of $4,081 per 40ft container – more than double the long-term average price.
Drewry Hong Kong-Los Angeles spot freight rate benchmark ($/40ft container):
Drewry believes what we are witnessing is something beyond the usual dynamics of market supply and demand at work. While Asian container shipments to the US are currently very strong, shippers are replenishing their inventories, there is a shortage of empty boxes in China and some shipping capacity has been taken out by carriers through cancelled sailings. But the higher level of concentration in the ocean carrier industry, combined with new, tighter capacity management discipline among carriers are also behind these exceptional freight rate levels. Ocean carriers seem to have come to realize the opportunity presented by the COVID-19 crisis and that by managing capacity closely, they can manage prices with potency.
These developments will be concentrating the minds of shippers. Regulators in China and the US are already watching the market closely.
Because spot rates tend to be leading indicators of contract rates, contract shippers/Beneficial Cargo Owners should start to budget for higher contract rates on most routes in 2021.
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