24-02-2018

Containers roundup: Concern over freight forwarders securing loadings below assessed level

Week commencing February 19 saw the supply chain start pressurizing carriers for more realistic box rates as Lunar New Year drew to a close.

The expectation for main head haul box rates to drop has been apparent since early February, with carriers taking proactive measures to maintain box rates at least at pre-New Year levels.

The carriers issued void sailings for the next few weeks and notified their customers that the validity period of box rates had been extended to mid- to end-March.

The anticipated drop has occurred from February 21, albeit with a varied impact. The first head haul route to lower its box rate was North Asia to Mediterranean, down $100 to $1,200/FEU on February 21.

The North Asia to North Continent and UK routes both fell $100 to $1,500/FEU on February 22.

The concern though, from a box rate perspective, is that freight forwarders are already securing loadings well below this assessed level, with some rates as low as $1,300/FEU.

A logistics source said box rates “could fall back to December levels before the end of February.” S&P Global Platts assessed box rate level for December at $1,300/FEU for these routes.

The North Asia to West Coast North America route has seen a more drastic drop of $200, February 23, to $1,300/FEU.

On the East Coast inbound route from North Asia, PBR5, the box rate dropped to $2,600/FEU from $2,800/FEU Friday.

As mentioned earlier, the container industry had expected box rate decreases but with US annual contract negotiations starting to take place it had hoped for a calmer rate decline than the recent $200 incremental declines.

However, the container market is in a better position than it was this time last year and the US annual contracts should be secured at a higher level over the coming months, similar to the European ones.

Source: Andrew Scorer (Platts)

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