FEATURE: Mid-April rate hikes lift trans-Pacific container freight to 5-month high

The eastbound trans-Pacific container trade saw large increases April 17, bringing rates to five-month highs after ocean carrier general rate increases supported spot pricing.

This was largely expected by the market in the weeks leading up to April 15, when increases were set to come into force. While carrier nominations called for increases ranging between $600/FEU and $3,000/FEU, with the bulk of mainline carriers at the $1,000/FEU level, few if any expected full-measure increases to come into effect.

S&P Global Commodity Insights has seen increases averaging between $400/FEU and $600/FEU for most carriers and NVOCC spot offers on a port-to-port basis.

Platts Container Rate 13, North Asia to West Coast North America, jumped 32% April 17, to be assessed at $1,650/FEU, S&P Global data showed. This is the highest value seen on this lane since Oct. 31, 2022. Still, the rate is off nearly 80% year on year after rate declines gathered pace in the second half of 2022.

At the same time, Platts assessed PCR 5, North Asia to East Coast North America, 27% higher on the day April 17 at $2,500/FEU, S&P Global data showed, the highest since Feb. 16.

Rates into the USEC remained elevated long after those to the US West Coast began to drop in mid-2022, due to lingering congestion in and around Atlantic Coast ports.

Despite the successful GRI implementation, bearish expectations abound as many market participants see the increases as largely short-term maneuvers, and not indicative of market fundamentals tightening sufficiently to support rates through the second and third quarters.

"[I] don't think it will last that long, it's the carriers trying to push the last few remaining deals done," a freight forwarder said, noting that many trans-Pacific volume contracts were set for renewal at the end of April.

"Be prepared; there will be a GRI in the market now every month until October, but if it will stick is a different matter."

Demand outlook remains soft

The current round of successful increases has largely been attributed to a redoubling of efforts on the part of carriers to control capacity amid a raft of blanked sailings and vessel layups, rather than any material uptick on the demand side. In fact, import demand is projected to remain weak through the first half of the year.

USWC ports were forecast to handle 5.78 million TEU during H1 2023, down 24.6%, while USEC volumes were forecast to decline 15.9% to 5.55 million TEUs, Hackett Associates said in its most recent Port Tracker report.

Year-to-date container imports through February were down 20.7% to 3.77 million TEU, with H1 volumes expected to come in 19.5% below the same period in 2022.

"Carriers' discipline will be tested in the coming weeks to see if the higher rates would hold, and if the carriers can push through the next round of GRI scheduled for 15 May," Asia-based market analysis firm LinerLytica said in an April 17 report.

Trans-Atlantic fundamentals point to continued weakness

In the Atlantic Basin, excess capacity and weaker demand continue to take their toll on rates. Platts assessed PCR9, North Continent to East Coast North America, at $3,400/FEU April 17, a 16% decline since the beginning of April, and down 42.4% since the year began, S&P Global data showed.

Since demand on the trans-Pacific trade lane began to wane in 2022, many carriers shifted their vessels to the more-lucrative trans-Atlantic route, bringing a shift toward overcapacity on the trade. Simultaneously, sources pointed to weak demand and inflated European energy costs as other factors contributing to the bearish landscape.

"I don't know what they can do, other than remove capacity, which would be a foolish move at this point," a US-based freight forwarder said. "They had to know it would be a matter of time as they kept adding more ships to the trade that the price would slide, and it certainly has."

Additionally, a carrier source in Europe cited a significant decline in fixed contract rate levels on the trade. Overall, market participants expected the trans-Atlantic rate to continue eroding as consumer demand showed no signs of increasing.