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Home » Ocean spot rates soar on key trans-Pacific trade lane
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Ocean spot rates soar on key trans-Pacific trade lane

August 8, 2012
DC Velocity Staff
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Ocean carriers operating from Hong Kong to Los Angeles have pushed through a $500 general rate increase on shipments of forty-foot-equivalent containers. This increase has propelled the spot rate for the Hong Kong-to-Los Angeles corridor to its highest level of the year, according to data from a leading maritime and supply chain consulting firm.

London-based Drewry Maritime Research said eastbound spot rates tracked as of Aug. 8 hit $2,452 per forty-foot-equivalent unit, (FEU). The current rate is a 17.5-percent increase from prices quoted just the week before and an 89-percent jump from rates for this time last year, Drewry said. It also represents the fifth week-over-week rate increase of more than 10 percent so far in 2012, it said.

The current increase actually took effect in two phases. The first, an increase of $71 per FEU, was implemented last week. The second, a hike of $429 per FEU, was reported today, Drewry said.

Drewry executives attributed the increases to a combination of tight vessel capacity in the Asia-U.S. trades and a 7-percent year-over-year increase in demand. Drewry said container capacity on the trans-Pacific route appears to be much tighter than in the Asia-Europe trades, where end demand has been dampened by the ongoing economic crisis in Europe.

A separate report released yesterday by consultancy Zepol Corp. found that July U.S. ocean import volumes, measured in 20-foot-equivalent units (TEU), increased 9 percent from June levels and 10.8 percent from July 2011 figures.

Import volumes in July hit their highest levels since August 2010, according to the consultancy. Eight of the top ten exporting countries to the U.S. reported record-high volumes for the year, with Taiwan and Hong Kong being the exceptions. Imports from South Korea rose 13 percent, while imports from China rose 6 percent, Zepol said.

Ocean import volumes are generally at their strongest in July and August as U.S. retailers gear up for the holiday season. However, Zepol said that the July data "shows an unusually big jump" that may auger more positively for the peak season than in recent years.

The gains in freight rates and shipping volumes, however, have not changed Drewry's view that rate levels will drift lower through the latter part of August. The consultancy believes that demand is not consistently strong nor is capacity sufficiently tight to justify current rate levels.

"We tell shippers to expect that spot rates have reached a plateau and will now decline," Martin Dixon, the firm's research manager for freight rate benchmarking, said in a statement.

Perhaps as evidence of that, carriers in mid-June implemented a $450-per-FEU peak season surcharge, only to see their customers beat back most, if not all, of that increase, Dixon said.

Still, spot rates on the lane are 44 percent higher than the 2011 full-year average and are 40 percent higher than the historical average for 2006 through 2011, according to the consultancy. Because spot market rates are often used as a starting point for contract rate negotiations, importers and exporters may need to adjust their 2013 negotiation strategies to brace for higher prices, Drewry said.

Transportation Maritime & Ocean
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