After the double-digit increase in average spot rates for container shipping from China to Europe observed in the first week of June 2024 by the Drewry Container Index, data released on June 13 shows a cooling off. The growth rate between Shanghai and Genoa was three percent, reaching $6,862 per FEU, while the rate between Shanghai and Rotterdam increased by two percent to $6,177. In the reverse direction, between Rotterdam and Shanghai, the rate rose by three percent to $661 (after a slight decline the previous week).
On the Pacific side, rates along the Shanghai-Los Angeles and Shanghai-New York routes recorded a one percent increase, reaching $6,025 and $7,299 per FEU, respectively. Conversely, rates on the Rotterdam-New York route experienced a slight one percent decrease, settling at $2,118 per FEU, while in the opposite direction they rose by two percent to $640. Finally, rates on the Los Angeles-Shanghai route remained stable at $693.
In summary, the composite Drewry index – which considers all routes – saw a two percent increase in one week, reaching $4,801 per FEU, a percentage that exceeds 200% (202%) annually and reaches 238% compared to the pre-pandemic period when the average rate was $1,420 per FEU.
In a video published on YouTube on May 29, 2024, Simon Heaney, Senior Manager of Container Research at Drewry, noted that in the previous three weeks, the composite index based on eight east-west routes increased by 49% and commented that this trend was “unexpected” because until May, the forecasts were for a decline after the January peak. This decline was expected to continue until the next peak period in the third quarter of the year.
Generally, the spike in rates is attributed to the Red Sea crisis, but Heaney’s analysis is more nuanced. He explains the unexpected turn by considering four elements: supply, demand, shipper behavior, and operational disruptions. On the supply side, there appears to be a shortage of space. Heaney uses the conditional tense because without data on demand (which is currently only available up to March 2024), no definitive assessments can be made.
This brings us to the second element, demand, which is not updated. First-quarter 2024 data confirms that loaded volumes exceeded forecasts, with a 23% year-on-year increase between Asia and the west coast of North America and a 10% increase between Asia and the Mediterranean. However, it should be noted that the first quarter of 2023 had relatively low values, while if we consider peak quarters, the first quarter of 2024 is ten percent lower.
Regarding container shipping demand for the second quarter of 2024, Drewry offers only “anecdotal information,” suggesting that “some shippers are advancing bookings as a precautionary measure.” This observation aligns with those of other analysts and can be explained by a sort of “pandemic syndrome”: shippers are advancing shipments for the upcoming peak period fearing that rates will rise further.
Heaney then moves to the third element, shippers. In mid-May, Drewry conducted a survey showing that 60% of cargo owners do not see an increase in transport demand on routes between Asia and Europe or North America, while 40% report an increase. According to Drewry, the percentage of the latter is sufficiently high to suggest that volumes are growing.
Talking about operational disruptions, the Red Sea crisis comes to the forefront, which has lengthened travel times for the circumnavigation of Africa, but the analysis also includes bad weather affecting some major ports. Therefore, longer routes, voyage cancellations, and port congestion in Asia, combined with a sudden increase in demand, have triggered the surge in spot rates.
Heaney’s analysis concludes with a touch of optimism, as the analyst believes that some issues might soon be resolved. Global capacity should increase with the arrival of new container ships. In the first four months of 2024, one million TEU of capacity has already been delivered, much of which has already been integrated into Suez Canal deviations. Another two million TEU is expected to be launched by the end of 2024. There is also hope that weather conditions will improve.
The Red Sea remains an unknown, and Drewry shares concerns that the Suez Canal may not return to full capacity by the end of 2024. Therefore, if demand continues to exceed forecasts, pressure on carriers and container availability will remain high. However, according to Heaney, the rate rally between Asia and Europe could show a reversal in June, and the transpacific market might stabilize in the second half of the year.
