Short- and long-term rates converge on Far East to US routes, offering opportunity for carriers and shippers alike
Declining spot rates on the Far East to US West Coast and East Coast ocean freight trades have converged with historically strong long-term rates, presenting business opportunities for both carriers and shippers.
According to the latest market intelligence from Oslo-based Xeneta, spot rates to the East Coast have now fallen by more than USD 3 400 per FEU (-26.9%) this year, while those from the Far East to West Coast have slumped by USD 3 200 (-33.1%). Long-term rates, on the other hand, have sky-rocketed. 2022 has seen long-term contracted prices soar by 103.5% for East Coast trades and 96.9% for the West Coast.
It's a development that offers “new strategic openings” for ocean carriers and their customers, according to Peter Sand, Chief Analyst, Xeneta.
Flexibility pays
“We’re noticing a similar pattern across a number of key global trade corridors,” he notes. “The spread between the long- and short-term rates is diminishing and, in some cases, turning negative. This is of interest to both sides in the ocean freight value chain.
“On the carrier side they might be able to tempt those shipping large volumes from the Far East to the US to sign up to long-term contracts, instead of playing the spot market. On the other hand, the falling spot price gives shippers looking to improve supply chain resilience an opportunity to strike a better balance between long- and short-term rate strategies. Those with an eye on the latest market data will be at an advantage here.”
Negative moves
Long-term rates for the trades are, at present, “moving sideways” according to Sand, while spots continue to dip. Short-term rates on the West Coast routes are already below long-term prices, with the same “negative spread” likely to take place later in August on the Far East – US East Coast trade.
“It’ll be interesting to see what happens to the long-term rates in this climate of change,” he adds.
East Coast muscle
For the time being, as of 9 August, the spot rates for the Far East to the US West Coast are USD 6 400 per FEU and USD 9 300 per FEU for the US East Coast. This demonstrates the strength of the East Coast routes at the moment (with carriers shifting capacity to counter congestion issues and bottlenecks on the West), with an almost USD 3 000 premium. Traditionally, costs have stood ‘just’ USD 1 000 higher for shipping a 40' container from the Far East to the US East Coast than to the West.
Long-term rates to the East Coast are also above those of their sister coast, with a USD 1 900 per FEU premium on 9 August.
Oslo-based Xeneta’s unique software platform compiles the latest ocean and air freight rate data aggregated worldwide to deliver powerful market insights. Participating companies include ABB, Electrolux, Continental, Unilever, Nestle, L’Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
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