Transpacific ocean cargo rates remain stable…for now

The Drewry Hong Kong-Los Angeles container rate benchmark, published in the latest Container Freight Rate Insight report, jumped 14% to $2,524 per forty-foot equivalent unit (FEU) this week, as the January peak season surcharge (PSS) took effect.

The $311 per 40ft increase in the benchmark rate shows that Transpacific Stabilization Agreement (TSA) member carriers’ achieved around 50% of their intended $600 PSS price increase target.

“Cargo demand and carrier load factors have strengthened in the run up to Chinese New Year,” said Martin Dixon, Drewry’s research manager for freight rate benchmarking. “The wild card remains the threat of strike action at U.S. East Coast and Gulf Coast ports which is also serving to strengthen rates.”

Zepol Corporation, a leading trade intelligence company, recently noted that The Ports of Los Angeles and Long Beach are the busiest ports in the country and both have posted slight decreases from 2011 by 0.7% and 2.3%.

The latest price increase brought Drewry’s Hong Kong-Los Angeles container rate benchmark back to the same level it was at in October, but the index remains 12% off last year’s peak reached in August.

The transpacific has proved more resilient than the Asia-Europe trade to the overcapacity plaguing the industry. Drewry’s Transpacific Eastbound Freight Rate Index, a weighted average of freight rates across multiple trades between Far East Asia and North America, climbed 8% in December compared with the previous month, to reach $3,357 per FEU. It now stands just 2% off last year’s high reached in September 2012.

Though given the increase in capacity on the trade compared with a year ago, the stability in spot rates may not prove sustainable.

“The US East Coast and Gulf Coast strike threat notwithstanding, we expect spot rates to soften following Chinese New Year,” added Dixon. “However, we caution that shippers should expect some increase in their 2012-13 contract rates on the eastbound transpacific, given the stronger state of the market compared to last year.”

Dixon is among the panel of industry experts scheduled to speak at LM’s upcoming “Rate Forecast” webinar on January 31.