The Freightos Baltic Global Container Index (FBX) climbed 6 percent in February to another FBX-high of $4,295 per 40-foot container or equivalent unit (FEU), a 223 percent annual increase, driven mostly by still-surging volumes from Asia to the U.S. West Coast, according to Judah Levine, research lead at the online freight marketplace.
“The sustained surge is still being driven by consumers spending on goods instead of services and by retailers struggling to push inventory levels up, which means no relief for the extreme congestion and delays at key ports like Los Angeles and Long Beach,” Levine wrote in the FBX monthly report. “There is normally a seasonal increase in demand and spot rates ahead of the Lunar New Year holiday week during which much of China’s manufacturing shuts down. Rates usually plateau over the break and gradually decrease as the backlog is cleared in the weeks after the holiday. This year, however, due to non-stop demand and many Chinese factories staying open because of travel restrictions, spot rates to the U.S. continued to climb throughout the month.”
Levine noted that Asia-U.S. West Coast rates increased 15 percent to $4,922 per FEU, representing a 27 percent rise over the level at which prices plateaued from September to December and 259 percent higher than this time last year. Prices for Asia-U.S. East Coast routes dipped for much of the month before climbing back to just below their January peak, gaining 3 percent for the month to $5,822 per FEU, but still 19 percent higher than at the end of December and 119 percent higher than a year ago.
For the week ended March 4, Drewry’s composite World Container index decreased 2.2 percent, or $117, to stand at $5,121.04 per FEU. Freight rates on Shanghai-Rotterdam weakened $286 to reach $8,188 per FEU and those on Shanghai-Los Angeles dropped $130 to $4,261 per FEU.
Contrarily, rates from Shanghai to New York grew $23 to reach $6,651 per FEU, The average composite index of the WCI, assessed by Drewry for year-to-date, was $5,231 per FEU, which is $3,539 higher than the five-year average of $1,692. Drewry expects rates to stabilize this week.
“With port congestion causing delays that effectively restrict capacity and ocean carriers still reporting overbooked ships, observers are not expecting an easing of the equipment shortage and backlogs at least until sometime in Q2,” Levine wrote.
Peter Stallion, head of air and containers at Freight Investor Services, described the situation as “a general maxing out of global ocean-going capacity colliding with fluctuating demand.”
“Much of the price action has been driven by global capacity issues, however, anecdotally at least, congestion has alleviated substantially, driving more demand in FFAs (forward freight agreements) as counterparties move out of crisis mode and start to plan for the future,” Stallion wrote in the report. “Much of the firm interest lies in Q3 onwards, outside of the scope of what any liner or shipper can predict or contract with certainty in the physical market.”
He said the recent attractiveness of FFAs centers on “an incredibly diverse contract structure between carriers, with long-term agreements clashing with uncertain volumes and forward spot prices.” Stallion added that “the use of index-based pricing has driven efficiency and transparency, however the FFA has been employed to offer price security without restricting businesses to the terms of a rigid physical agreement price.”
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