ContainersGreater China

Yantian congestion pushes box spot rates to new highs, ceiling still not in sight

Hobbled by growing congestion at Chinese export gateway Yantian and key receiving terminals such as Oakland and Hamburg, the Shanghai Containerized Freight Index shot up by another 3.3% today to hit new records. The box spot index operated by the Shanghai Shipping Exchange climbed 117 points to close the week on 3,613 points, up 157% year-on-year.

Similarly Drewry’s weekly World Container Index, published yesterday, showed more steep price climbs for shippers to contend with. The average global price to move an feu now stands at $6,473.78, more than three and a half times the price this time last year.

Analysts contacted by Splash today suggest the box freight rate ceiling is still a way off.

Local events tend to deliver global ripples

“There aren’t currently any barriers preventing rates from continuing their ascent,” said Simon Heaney, senior manager of container research at UK consultants Drewry. “Demand is still surging and port productivity and equipment availability is worsening. Unless those conditions change – we don’t think they will until 4Q21 at the earliest – then prices will go up and up.”

“The elevated SCFI rate level seems here to stay for a while,” commented Jan Tiedemann, a shipping analyst at Alphaliner, suggesting that longer term most carriers expect rates to return to a “new normal” that is some 10-20% above the pre-Covid level.

There aren’t currently any barriers preventing rates from continuing their ascent

Peter Sand, BIMCO’s chief shipping analyst, said the next general rate increases, due on June 15, would likely push rates up further.

“The current crunch in supply chains is the catalyst; local events tend to deliver global ripples,” Sand said, going on to mention the Covid-19 outbreak that has hampered productivity in Yantian with more than 40 ships waiting to berth (see map below) and yesterday’s dramatic double crane collapse at Kaohsiung, Taiwan’s largest port.

“It is clear that the pricing of spot cargo presently is governed by the fact that there is insufficient capacity,” commented Lars Jensen, the CEO of Danish consultancy Vespucci Maritime. Jensen suggested a ceiling could be reached when enough shippers are priced out of the market.

“Pricing is now directly linked to the value of the cargo being moved – or more aptly the impact on the importer if cargo does not move,” Jensen said, adding: “The upper limit of this being determined by the point where sufficiently many shippers become priced out of the market and will abstain from booking.”

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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