[Freightos Weekly Update] Asia - Europe ocean rates continue to fall, with newbuilds arriving soon

Key insights:

1. Transpacific ocean rates were stable last week, but remain 90% lower than a year ago and below 2019 levels. Asia - Europe rates fell another 8%.

2. With demand decreasing, projections for an H2 rebound are mixed. A sharp increase in new containerships coming on the market is scheduled for the coming months, though carriers may postpone some of those deliveries and have increased demolitions to reduce the impact of the capacity increase.

3. In air cargo, some carriers will increase ex-Asia capacity in anticipation of a rebound though demand is currently subdued. Freightos Air Index transpacific rates were $3.64/kg last week with Asia - Europe prices at $4.39/kg, 70% and 35% lower than last year, respectively.

Ocean rates:

• Asia-US West Coast prices (FBX01 Weekly) fell 4% to $1,238/FEU. This rate is 92% lower than the same time last year.

• Asia-US East Coast prices (FBX03 Weekly) increased 1% to $2,633/FEU, and are 85% lower than rates for this week last year.

• Asia-N. Europe prices (FBX11 Weekly) fell 8% to $2,682/FEU, and are 81% lower than rates for this week last year.

Analysis

Lunar New Year is now behind us, and as we enter the typical ocean freight lull until peak season a lot of uncertainty remains as to what the rest of the year will look like.

On the demand side, transpacific import volumes continue to fall, and though many projections and industry leaders anticipate an H2 rebound, some analysts are not as optimistic.

On the supply side – even with demand falling – a surge in new containerships from the record orderbook will start being delivered next month. At the same time some observers expect about 25% of those orders to get postponed, and carriers are increasing the number of older vessel demolitions as ways to reduce capacity.

On the rates side, transpacific prices dipped slightly to the West Coast and were stable to the East Coast last week, but remain about 90% lower than a year ago, and still below 2019 levels. Asia - N. Europe rates fell 8% and are now more than 80% lower than last year.

The rate declines are reportedly putting carriers and shippers at odds as long-term transpacific contract negotiations get underway. Shippers are pointing to the spot market as the basis for lower contract rates while carriers argue that inflation-driven cost increases mean prices will have to be adjusted upward.

In air cargo, some carriers are planning to increase ex-Asia capacity in anticipation of a rebound in demand. In the meantime, demand remains subdued. Freightos Air Index transpacific rates were $3.64/kg last week, 70% lower than a year ago, with Asia - Europe prices at $4.39/kg, 35% lower than last year.