Freight rates on the U.S. line bucked the trend and strengthened, but the Asian and European markets were declining.

Sunny Worldwide LogisticsIt is a logistics company with more than 20 years of transportation experience, focusing on markets such as Europe, the United States, Canada, Australia, and Southeast Asia. It is more of a cargo owner than a cargo owner~

Recently, the container spot freight rates on the trans-Pacific route and the Asia-Europe route have shown significant divergence. According to Drewry’s latest weekly report released on May 16, the freight rate on the Shanghai to Los Angeles route increased by 10% to US,357 per FEU; the freight rate on the Shanghai to New York route increased by 14% to US,252 per FEU. During the same period, the Xeneta regional index showed that the quoted price for the US West route was US,884/FEU and the US East route was US,974/FEU, which was hundreds of dollars different from Drewry's data. This price difference reflects the difference in the statistical caliber of different data sources - Drewry is more biased towards quotes from shipping companies, while Xeneta is closer to the actual market transaction price. Therefore, when providing quotations to customers, it is necessary to clearly define the benchmarks to be referenced.

This round of U.S. line freight rate increases are mainly driven by two major factors: first, emergency fuel surcharges caused by blocked passage in the Strait of Hormuz; second, market expectations for the peak season. Yang Ming Shipping has imposed a comprehensive rate increase surcharge (GRI) of US,000 per FEU from May 15. Drewry predicts that U.S. line freight rates will still have room to rise in the coming week.

It is worth noting that despite rising freight rates, shipping companies are still canceling voyages. Drewry reports that seven sailings on the trans-Pacific route will be canceled in the coming week. On the surface, it seems contradictory for shipping companies to increase prices while suspending sailings, but in fact the logic is consistent - current demand has not substantially recovered, and the underlying driving force for rising freight rates comes from shipping companies actively reducing shipping capacity to maintain prices. This judgment has important reference significance for freight forwarders' quotation strategies.

In sharp contrast to the US line, the Asian and European markets show completely different trends. Drewry data shows that the freight rate from Shanghai to Rotterdam increased by 11% to US,530/FEU, and that from Shanghai to Genoa increased by 20% to US,620/FEU. However, Xeneta data shows that Asia-Europe spot freight rates have been falling for several consecutive weeks, reaching approximately US,531/FEU on the Nordic route and approximately US,451/FEU on the Mediterranean. Behind the data fight, it reflects that the Asia-Europe market has basically digested the impact of alternatives such as bypassing the Cape of Good Hope, land bridges and new routes, and excess capacity at the bottom of the market has once again become the dominant factor. In other words, the increase in freight rates on the US line is the result of shipping companies' control of cargo space, while the Asia-Europe market is running smoothly due to alternative routes, and the imbalance between supply and demand suppresses freight rates.

Xeneta chief analyst Peter Sand pointed out that the short-term increase in U.S. line spot freight rates may be unsustainable. The reason is that U.S. importers are delaying signing new long-term contracts, and the uncertainty of the situation in the Middle East makes cargo owners tend to wait and see through the spot market, where a large number of goods flow. However, as old and new long-term contracts are gradually replaced, cargo volume will return to the contract price system, and the spot market will subsequently cool down. Sand expects this pullback to be gradual and not a cliff-edge decline given the approach to the traditional summer peak season. Therefore, for U.S. line freight forwarders, the period from mid-to-late May to mid-June is the window period when spot freight rates are relatively strong - shipping companies support prices through suspension of sailings and peak season expectations. Customers' wait-and-see sentiment has not subsided, and there is still room for short-term freight rates to be realized.

The strategies of different shipping companies on the two major routes are diverging. In the trans-Pacific direction, shipping companies are pushing up freight rates through a combination of GRI and sailing suspensions, while waiting for changes in demand after the long-term contract negotiation window closes. In the Asia-Europe direction, shipping capacity continues to shrink, and some shipping companies have transferred shipping capacity from the Asia-Europe route to the Atlantic route - data shows that the Atlantic westbound shipping capacity increased by 5.9% within a week, precisely because shipping companies have reconfigured ships that originally ran to Asia and Europe. This is also an important basis for Xeneta’s belief that there is “structural excess” in the Asian and European markets. Asian shipping companies such as Wan Hai Shipping and Yang Ming Shipping have recently stated many times that the situation in the Middle East will lead to an imbalance in global container supply and demand, and freight rates in North America, Europe and short-ocean routes will be more likely to rise than fall in the future.

For freight forwarding companies, the following points deserve attention:

When quoting US lines, it is recommended to refer to both sets of data from Drewry and Xeneta, and proactively explain the data differences and their basis to customers so that customers know the benchmark source of the quotation. At the same time, it should be explained to customers that the real reason for the increase in freight rates this time is due to the shipping company's control of space rather than strong demand. For example, proactively informing customers that "the shipping company has canceled multiple voyages to tighten space" is more convincing than simply attributing it to an increase in cargo volume and helps manage customer expectations.

The pricing strategy for the Asia-Europe route should be distinguished from that of the US route. There is still room for transmission of the GRI of the US line, but the Asian and European markets are approaching saturation, and there is limited room for price increases. For customers in the European direction, it can be seen that the detour plan has been operating stably and freight rates have basically bottomed out, so there is no need to rush to lock in prices.

It is recommended to focus on the quotation window from late May to mid-June. At this stage, long-term contract negotiations have not yet been finalized, shipping companies are still suspending sailings, peak season expectations have not yet been fulfilled, and spot freight rates on the US line are relatively strong. If any customers plan to ship during this period, they can remind the shipping company that the GRI has been announced and it is recommended to book space as soon as possible. After a large number of long-term contracts are implemented in July and the cargo volume returns to the contract price system, the bargaining space in the spot market may be compressed.