Shipping lines have been in the red in the trans-Pacific trades for months. They may have just inched back into the black again, courtesy of the rise in spot rates over the past five weeks.
Annual trans-Pacific contract rates reset to sharply lower levels in May. Even so, multiple ocean carrier execs insisted on conference calls that they did not sign annual contracts at levels that locked in a year’s worth of losses.
The problem for carriers in recent months: A portion of their trans-Pacific volume — in some cases 50% — was booked in the spot market, at rates much lower than newly inked contracts, dragging the overall mix into loss-making territory.
Now, according to data from Xeneta, average trans-Pacific spot rates have just edged above average contract rates. If carrier execs are telling the truth about not signing loss-making contracts, and if spot rates are at or above contract levels, it implies a more sustainable market for shipping lines.
Xeneta spot and contract indexes
According to Xeneta data, short-term rates in the Far East-West Coast lane averaged $1,954 per forty-foot equivalent unit as of Friday, 4% higher than average long-term contract rates of $1,874 per FEU. This is the first time average spot rates have exceeded average contract rates since late June 2022.
(Chart: Xeneta)
Xeneta put Friday’s average short-term rate in the Far East-East Coast trade at $2,917 per FEU, 7% above the contract rate average of $2,715 per FEU.
Spot rates in this lane have risen above contract rates for the first time since July 2022.
(Chart: Xeneta)
Other indexes show spot rate rise
Different index providers use different data sources and methodologies and come up with different numbers, but they all show the same upward trend in trans-Pacific spot rates since late June.
The Drewry World Container Index (WCI) provides weekly averages. It has now reported increases for five straight weeks. In the week ending Thursday, the WCI Shanghai-Los Angeles spot assessment was at $2,322 per FEU, up 47% from the week ending June 29 to the highest level since early November.
The WCI Shanghai-New York spot rate index rose to $3,330 per FEU in the week ending Thursday, up 33% from June 29 to the highest level since mid-January.
Weekly spot rate in USD per FEU. Blue line: Shanghai-Los Angeles. Green line: Shanghai-New York (Chart: FreightWaves SONAR)
The Freightos Baltic Daily Index (FBX) assessed average spot rates in the China-West Coast trade at $1,710 per FEU on Thursday, up 43% since June 30. The FBX China-East Coast index was at $2,737 per FEU, up 25% since June 30.
Daily spot rate in USD per FEU. Blue line: China-West Coast. Green line: China-East Coast (Chart: FreightWaves SONAR)
Shipping capacity and cargo volume
Analysts say trans-Pacific spot rates are rising due to a confluence of carrier capacity management and a modest increase in cargo demand.
Sea-Intelligence reported an increase in “blank” (canceled) sailings over recent months. “We find a clear correlation between the sharp uptick in blank sailings on the trans-Pacific at the end of June and the subsequent improvement in spot rates,” said Sea-Intelligence CEO Alan Murphy.
On the demand front, FreightWaves SONAR tracks the trend in a portion of bookings bound for the U.S. from all overseas ports, as of the scheduled departure date.
The level of scheduled bookings covered by the data set was near its 2023 high on Friday, up 35% from the recent low in early May and up 13% from booking levels at the same time of year in 2019, pre-COVID.
Blue line: 2023 bookings trend. Orange line: 2019 bookings trend. (Chart: FreightWaves SONAR)
Click for more articles by Greg Miller
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