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Container Market: Premium of spot rates to agreed US annual contract box rates has risen to levels that are making end-users question the reasoning behind them says S&P Global Platts

Peak season to date has not been as bullish as some market participants expected. There have been box rate increases throughout August and this is expected to continue into September. However, there are some fundamental issues causing uncertainty within the container industry. The first one is the new larger TEU vessels deliveries continue to create surplus capacity for carriers, especially within the North Europe market. The knock-on effect is that this has put the carriers in a weaker negotiating position for spot box rates. A freight forwarder said that “logistics providers will often book a few carriers for the same container cargoes and fail all but one at the last moment, a thing only possible when carriers are in a weak position. So, they have to pick up the bills for empty space on vessels.”

Another issue is that the premium of spot rates to agreed US annual contract box rates has risen to levels that are making end- users question the reasoning behind them. “Customers are looking at the yearly contracts which have numbers that are twice lower than on spot and it’s hard to understand for them why they pay so much. And explaining that capacity is full and it’s a peak month and that’s where the spot market is now may be complicated,” a carrier said. Some carriers have made first-half losses so they need to recoup these during the peak season otherwise the end of year results could be disastrous.

The US trade war is still causing uncertainty on box rates after October 1. Carriers are especially concerned that the end-users have front-loaded their supply-chain programs to avoid any additional items being added to the banned lists. Finishing on a positive note for carriers, they are expecting to see increases of $100-$300 per FEU on September 1 box rates on the majority of the main head-haul routes, unless something unexpected happens.


On August 1, there was a 25% increase on the PCR13, North Asia to West Coast North America, route to $2,000/FEU, carriers then managed another price hike to $2,200/FEU, August 8 before slowly reducing to $2,100/FEU, August 20 where it has remained as of August 24. Similar box rate increases occurred on the East Coast on August 1 and 8 to $3,000/FEU and $3,200/FEU respectively. The East Coast box rates remain between $3,050/FEU and $3,300/FEU but on August 16 PCR5 fell to $3,150/FEU. September 1 carriers are hoping they can achieve a modest increase of $100-$200/FEU. September cargo allocation percentages looking supported but this is being offset by the October end of the peak season looming on the horizon.

North American Platts Bunker Charge
August 1 PBC13, North Asia to West Coast North America closed at $329.55/FEU before steadily decreasing to $322.22/FEU on August 15 before rebounding to $331.88/FEU on August 23. The North Asia to East Coast North America bunker charge, PBC5, followed a similar trend except more starkly. PBC5 went to $532.56/FEU on August 23, from $533.05/FEU, August 1 the bottom of the trough was $17 less on August 15 at $514.46/FEU.


Since July 1 rates have fluctuated between $1,450/FEU and $1,550/FEU as of August 24. This is in part due to the extra capacity issue. On the one hand it is positive that the box rates are more stable for carriers but the North Europe head-haul routes have not seen the $400 to $600 per FEU increases that occurred across the Atlantic. September 1 is thought to bring box rates into the realms of $1,700/FEU and $1,800/ FEU. One freight forwarder said “Would expect as September gets going rates to drop back down to $1,500/FEU level.” The main reason for this is the peak season is drawing to an end.

North Continent Platts Bunker Charge
August bunker charges have been more stable this month fluctuating between $295.04 on August 1 and $292.86 on August 23. On August 16 PBC1 was at its lowest, $285.23. Bunker charges seem to be continuing its upward trajectory with carriers still negotiating new terms with their customers.


In August the biggest story hitting the marine fuels industry was the ongoing fallout from the contaminated bunker fuel first spotted in Houston earlier this year and since exported across the world. More than 100 vessels are now thought to have been damaged by the phenolic compound contamination, and the problem has had consequences for bunker import flows as far away as Singapore.

Further developments have been announced in shipping companies’ moves to comply with the International Maritime Organization’s lower bunker sulfur limit in 2020. Hapag-Lloyd said it is preparing to test emissions-cleaning scrubber equipment on two of its vessels, and is converting a third to run on LNG. And Maersk has announced a joint initiative with storage operator Vopak to launch a 0.5% sulfur bunker facility in Rotterdam, and told S&P Global Platts it may produce its own blend of 0.5% sulfur fuel there rather than buying finished product from the refiners. Meanwhile Shell’s marine fuels unit has said it now has test samples of its 0.5% sulfur fuel blend ready for shipowners to try out in Rotterdam, Singapore and New Orleans.

Finally, bunker supplier Aegean Marine Petroleum has announced energy and commodity group Mercuria has become its sole lender under its US and global revolving credit facilities. Mercuria agreed to provide Aegean a $1 billion trade finance facility in July intended to support its existing credit facilities, after Aegean earlier in the year failed to meet a deadline to file its 2017 annual report to US regulators.

Source: S&P Global Platts

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