Trans-Pacific spot rates up 57 percent

The index of average spot prices for shipping a 40-foot container from Hong Kong to Los Angeles jumped by 57.4 percent in the week ended Aug. 9, signaling that freight rates on the trans-Pacific are on the rise.

 

The index climbed to $1,371, closing above the $1,000 mark for the first time since the week of May 9. It has been stuck firmly at $871 per FEU since July 9, with some rates in the average falling as low as $750 per FEU. The index, which excludes terminal handling charges, is compiled by Drewry Shipping Consultants in London.

 

Drewry said the average rate was based on prices the ranged from $1,200 to $1,500 per FEU.

 

Philip Damas, division director of Drewry Supply Chain Advisors, said rate increases appear to be sticking because “clearly the carriers cannot continue to price at a level where they were better off laying up the ships.”

 

“They had gone below the floor, so there had to be a correction,” he said. “The flip side is that once we reach a level where it makes sense to bring the capacity back, then it is possible that some of this increase will be eaten away again — some of it."
Liner executives said that the previous low average price of the index had a negative impact on the prices they negotiated for new annual trans-Pacific rates this summer, which were mostly negotiated and signed by the end of July, when rates were still low. Carriers had tried to delay signing the contracts in the hope that a surge in peak season container volumes would help drive rates higher, but apparently the surge did not come soon enough for most contracts, which were settled at rock-bottom levels. The Trans-Pacific Stabilization Agreement proposed a $500-per-FEU rate increase on July 7, but the carrier association has no enforcement powers and shippers have largely resisted going along with the guideline in their contracts.