Drewry's Container Freight Rate Insight

The Drewry Hong Kong-Los Angeles container rate benchmark, published in the latest Container Freight Rate Insight report, jumped 14% to US$2,524 per 40ft container this week, as the January peak season surcharge (PSS) took effect.

The $311 per 40ft increase in the benchmark rate shows that Transpacific Stabilization Agreement (TSA) member carriers’ achieved around 50% of their intended $600 PSS price increase target.

“Cargo demand and carrier load factors have strengthened in the run up to Chinese New Year,” explained Martin Dixon, Drewry’s research manager for freight rate benchmarking. “The wild card remains the threat of strike action at US East Coast and Gulf Coast ports which is also serving to strengthen rates.”

The latest price increase brought Drewry’s Hong Kong-Los Angeles container rate benchmark back to the same level it was at in October, but the index remains 12% off last year’s peak reached in August.

The transpacific has proved more resilient than the Asia-Europe trade to the overcapacity plaguing the industry. Drewry’s Transpacific Eastbound Freight Rate Index, a weighted average of freight rates across multiple trades between Far East Asia and North America, climbed 8% in December compared with the previous month, to reach $3,357 per 40ft container. It now stands just 2% off last year’s high reached in September 2012.

However, given the increase in capacity on the trade compared with a year ago the stability in spot rates may not prove sustainable. “The US East Coast and Gulf Coast strike threat notwithstanding, we expect spot rates to soften following Chinese New Year,” added Dixon. “However, we caution that shippers should expect some increase in their 2012-13 contract rates on the eastbound transpacific, given the stronger state of the market compared to last year.”

Both the Drewry Hong Kong-Los Angeles container rate benchmark, tracked by Drewry since 2005, and the Transpacific Eastbound Freight Rate Index are published in the Container Freight Rate Insight along with rates covering over 600 trade routes around the world. According to the Federal Maritime Commission, it is the most frequently used benchmark resource in index-linked contracts.