February's Container Market
– Head-haul routes could see box rates increase between 8% and 30% on February 1
– Pre Chinese New Year focused on maximizing cargo allocation
– Post Chinese New Year maintain box rates through void sailings
Carriers are optimistic that the head-haul routes may see box rate increases on February 1. There are significant variances in these and the container industry believes it could fall on the conservative side as the focus remains on maximizing cargo allocations before Chinese New Year occurs rather than sustainable price increases that could jeopardize a full cargo sailing.
The East Coast North America inbound route from North Asia is tighter than the West Coast for cargo allocations but both routes could see a box rate hike of between $200 and $500. Industry players believe a realistic box rate to the East Coast could be $3,000/FEU up 15% if achieved on February 1. The West Coast box rate is more conservative at $1,500/FEU but still equates to a 15% increase. Do not be surprised if the rates close either side of this on February 1, similar to what occurred January 1.
As February progresses we could see box rates slowly decline as it nears Chinese New Year if the carriers cannot fill their vessels. Some carriers were discounting heavily for certain cargoes to fill their vessels. Industry players have said that we may see another price increase February 8 or a PSS if demand remains strong. Afterwards though is a different story as some carriers have already announced their void sailing schedules to potentially alleviate the downward pricing spiral. The other factor to always be aware of is the new larger TEU vessel arrivals that can only operate on certain routes. February could prove to be a volatile spot market as the carriers keep an eye on each other as well as continue annual contracts negotiations.
WHAT WE SAW IN JANUARY
– North Asia to East Coast North America up 30% whereas West Coast up 8% compared to December
– North Asia to North Continent and UK both up 23% compared to December
– Head-haul price hikes for January 8, January 15 and Peak Season Surcharges did not materialize as planned.
The pricing structure proposed for January 2 before the festive holidays was implemented. The S&P Global Platts Container Index rose 13.5% on January 2 to 1,039.80/FEU due to the big gains on the head-haul routes, although it then fell and closed at $982.60/FEU on January 10, because the back-hauls lost ground. The Platts Container Index rebounded after the January 15 box rate increases and passed the $1,000 mark on January 25 at $1000.99/FEU up 9% from December.
The North Asia to West and East Coast North America proved difficult to assess at the start of January as certain carriers utilize higher TEU capacity vessels compared to their competitors who had a very high cargo allocation percentage for January. The trans-Pacific eastbound route, PBR13, achieved a 33% increase to $1,600/FEU, January 2 for two days before carriers dropped their rates to a more sustainable $1,450/FEU with validity till January 14. Container supply chain players were braced for head-haul price hikes for January 8, January 15 and Peak Season Surcharges but did not materialize. For most carriers, cargo utilisation and trade demand was strong as Chinese New Year approached, but certain carriers were not as full cargo wise as their competitors. This led to box rates falling to $1,300/FEU on January 15 till January 25. PBR5 North Asia to East Coast North America route increased by 22.5% January 2 and held up better than the West Coast, only dropping $50 on January 4 to $2,400/FEU. A carrier said that “they were still aiming to increase to $2,800 on January 15.” The increase proved to be less severe at $2,600/FEU where it stayed till January 25.
Across the Atlantic Ocean the head-haul routes PBR1 North Asia to North Continent and PBR11 North Asia to UK both increased 15% January 2 to $1,500/FEU. These routes both proved stable but the proposed rise in box rates to $1,800/FEU on January 15 brought a lower-than-expected box rate of $1,600/FEU. Validity periods were extended till the end of January to maximize cargo utilization but a slight reduction in rate occurred January 25 to $1,550/FEU. A carrier source said the “focus was now on February 1. With the Chinese New Year approaching, companies are accepting increases.” There was also movement on the North Asia to Mediterranean route and climbed 33% to $1,200/FEU from $900/FEU on January 2. The route remained unchanged as at January 25, but a carrier source said that “we are expecting an increase starting February 1.”