North America import rates hit fresh 2024 highs as Asian port congestion leads to capacity scarcity

US container import spot rates from both North Asia and Southeast Asia hubs have reached their highest levels in nearly two years, with knock-on effects from Red Sea diversions now compiling significant capacity problems for East Asian shipping lanes.

"Everything is full," said a North American logistics source. "It's like the beginning of the pandemic with premiums and equipment shortages. I've seen rates of $10,000/FEU this week into Los Angeles ... And the rolling is getting out of hand, honestly."

For cargoes from North Asia into West Coast North America, the spot rate was assessed by Platts at $6,100/FEU on May 30. Similarly, East Coast container imports from North Asia were called at $7,200/FEU on the same day. Both rates are at their highest levels since early fall of 2022.

Similarly, Platts Container Rate 23 -- Southeast Asia-to-West Coast North America -- spiked to $6,200/FEU on May 30, the highest since Aug. 16, 2022. At the same time, PCR25 -- Southeast Asia-to-East Coast North America -- rose to a yearly high of $7,200/FEU, the highest level since Sep. 22, 2022.

Asian shipping hubs are now dealing with more empirical problems manifesting from Red Sea diversions. Port congestion leading to subsequent roll pools of cargoes have surfaced, with particular pressure applied to key transshipment hubs such as Singapore.

"Congestion at Singapore has worsened, and a high volume of TEUs are stuck at port. Currently we don't know when it will ease out. There needs to be a method to increase their efficiency [and] productivity - or they have to open the new terminal quickly," a logistics source said.

Container volumes handled in Singapore have increased by 8.8% in the first four months of 2024 compared to the same period last year, resulting in longer wait times for container berths, according to a statement by the Maritime and Port Authority of Singapore released on May 30. While most container vessels are berthed on arrival, the average waiting time for container vessels is about two to three days.

Blank sailings -- having been labelled a tactical mechanism for carriers to reduce capacity and stabilize freight rates -- are now largely enforced due to ships unable to make weekly services, with the situation potentially worsening in June, the logistics source said.

Carriers monopolize space

In addition to blanks, market participants have said carriers have recently implemented another capacity control tool -- cracking down on minimum contract commitments. Several sources have reported stricter MQC policies, citing an increased desire from carriers to carry more spot and premium cargoes.

"I'm not sure where that leaves the contracts, but carriers have a way of removing space for low paying freight," said a freight forwarder.

With the rush for shippers to load cargo now as part of an early peak season rush, the ingredients are there to suggest these elevated freight levels could continue until the end of the peak cargo season in October, according to a report by analytics company Alphaliner.

With several bullish factors supporting rates -- tight space made worse by blanks; equipment shortages at origin; volume upticks ahead of peak season; and port congestion in Asia and North America -- it's unclear when the market will re-normalize. Still, sources expect the volatility to continue through the summer as import volumes further uplift rates.

"There isn't much threatening to drag down the market, at this point," said a North American freight forwarder. "Unless we start to see that new capacity hit the market, this is going to last. Carriers seem to have figured out the formula."

India-US trade lanes weaken

Not all US import markets, however, are showing significant upside jumps on congestion factors. From the Indian subcontinent, freight rates into East Coast North America are currently moving opposite to other Asia markets, with rates weakening. An oversupply of capacity and a "price war" between carriers vying to secure container business mean rates have shifted down for four consecutive weeks.

"ONE's new India-US service has introduced 250,000 TEUs into the market, resulting in overcapacity and now a price war between the carriers," a logistics source highlighted.

Market sources also noted the current blank sailings are enforced due to the reduction in the "effective capacity" because of the increase in transit time via Cape of Good Hope, unlike in the past where blank sailings are used as a tool to manipulate capacity.