Rates likely to remain volatile in the short term: Analysis
An unusually early Lunar New Year at the end of January set the precedent for a rise in container rates at the start of January before dipping to normal levels at the end of the month. However, with the new Trump administration putting plans in place to introduce new tariffs and the Red Sea crisis continuing to impact commercial vessels, rates are likely to remain volatile in the short term, says an analysis by Judah Levine, Research Lead, Freightos, on Baltic Exchange.
It elaborated:
The Freightos Baltic Index Global benchmark increased 13% in early January owing to pre-Lunar New Year demand, before easing to close the month 4% lower compared to the end of December at $3,656/FEU.
Another potential source of pressure on rates was avoided when the ILA union and USMX came to an agreement to avoid a January strike at US East Coast and US Gulf ports. Despite this, global rates remains 128% higher than those seen in 2019 as the Red Sea crisis continues. At the time of writing, the first phase of the Israel-Hamas ceasefire has meant a pause in Houthi attacks but it is likely that carriers will not return until they are convinced of longer term security in the Red Sea.
Asia to Europe and Mediterranean rates increased earlier than usual ahead of LNY because of longer Red Sea diverted voyages, with prices to Europe climbing 53% to more than $5,300/FEU from early November to December. Rates on this lane topped out at $5,600/FEU in mid-January before closing the month at $4,122/FEU, 20% lower than a month prior.
Asia to Mediterranean prices reached a peak of $5,685/FEU in mid-January, before dipping to $5,075/FEU to close the month 7% lower than December. Due to the early start and therefore likely little post-holiday backlog to clear, we may not see much of a post-LNY rebound on these lanes.
On the Transpacific routes, we saw normal seasonality as rates increased 23% to $5,929/FEU in the first week of January, before easing to $4,938/FEU to close the month – 2% higher than the end of December – as the pre-LNY rush subsided. To the US East Coast, rates increased 13% in the first week to $6,934/FEU, before easing to $6,656/FEU to close January, which was still 9% higher than in December.
With the new ILA-USMX agreement – which will allow the introduction of port technology and semi-automation without job reductions – in place, this removed a potential source of disruption and rate spikes for US East Coast and US Gulf shippers. With the strike averted, Transatlantic rates also avoided disruption surcharges and remained about level at $2,172/FEU.
Transpacific prices could rebound somewhat following LNY owing to a backlog of shipments not moved before the holiday. However, this should ease in February.
With the Trump administration now putting plans in motion to introduce tariffs to many trading partners, volumes into the United States are likely to remain higher than normal following LNY as many shippers look to hedge their bets. Frontloading ahead of potential tariff increases are likely to continue until the new tariffs are rolled out or possibly called off. This will keep volumes and rates higher than usual for now, before slumping once the tariffs go into effect.
Meanwhile, for all the ex-Asia lanes, rates remain highly elevated compared to 2019 because of the continuing Red Sea crisis. The current ceasefire has not been enough of an assurance to send carriers back through the Suez Canal. However, if and when Red Sea transits do pick up, the adjustment period to the shorter route for traffic from Asia to Europe and the Mediterranean could last for several weeks or longer. Schedule disruptions and vessel bunching in Europe and Asia as ships start arriving early will likely cause some congestion and delays at these hubs, which could put upward pressure on rates in the short term.
Source: Exim News Service: Barcelona, Feb. 6