Spot rates peak on major fronthaul trades

There has been a significant change in market dynamics in the past month as the spot rate spike peaked on major fronthaul trades.

Looking back just one month from 12 August shows average spot rates are now falling on the fronthauls out of the Far East, with the trade to North Europe being the exception due to a mid-July jump of USD 500.

The trade from the Far East to the US East Coast has fallen by 5% during that period, while average spot rates into the US West Coast have decreased by a more sizeable 16%.

Sitting in between the market decreases to the two US coasts are average spot rates to the Mediterranean and South America East Coast, which fell by 6% and 10% respectively.

Importantly, the long term market – and more specifically contracts signed within the most recent three months – have shown a slight uptick. This converging of rising long term rates and falling short term rates means the spread between these markets is reducing.

However, while the spread may be reducing it still ranges from USD 4 000 to USD 5 500 per FEU on trades out of the Far East.

For the backhauls out of North Europe and US West Coast, there is a ‘negative spread’, with long-term contract rates sitting slightly higher than spot rates. For US West Coast exports, the market has been that way since September 2021, whereas for European Exports the negative spread has only recently been restored after spot rates moved higher than long term rates between January and June this year.

The changing market dynamics means there are now only a few ‘Diamond Tier’ offers in the market, therefore this has been removed from the ‘please note’ box on the Xeneta platform.

Panama Canal

On Monday, 5 August, another slot was made available for 'Neopanamax' transits - the preferred method for containerships. That leaves a total of 36 daily transits available – which is close to normal conditions. The daily average in 2021 and 2022 was 35 and 37 respectively.

With daily transits for the months of June and July being just under 30, the final remaining chokepoint on this vital maritime corridor is ‘maximum allowed draft’.

The draft was increased to 48ft (14.063 meters) on 11 July, and again on 5 August to 49ft (14.94 meters). The normal level is 50ft, and for every foot below that level, less cargo can be carried. This easing of restrictions in the Panama Canal comes at a time when spot container shipping freight rates on most of the key fronthaul trade lanes are peaking. According to Xeneta data, average global spot rates mostly went sideways as July turned into August.

For further insights on the long term contract rates - read this Xeneta blog update: https://www.xeneta.com/news/ocean-container-shipping-market-reaches-a-tipping-point