Tumbling spot rates close gap between main Asia to US West Coast trades
The latest ocean freight rates data from Xeneta shows that spot prices across the main trans-Pacific and US West Coast corridors have converged over the past two to three months, with dramatic declines since the all-time highs recorded earlier this year.
Since the end of March, rates from South East Asia to the US West Coast have fallen by a massive 62%, while those from China have collapsed 49%. This leaves spot prices that were at one point separated by a spread of USD 3 800 per FEU on a par; with both trades currently in the region of USD 4 300 per FEU.
“Spot prices from Asia have, to be blunt, been falling considerably since May this year, with increasing rates of decline over the last few weeks,” comments Peter Sand, Chief Analyst, Xeneta. “We’re now at a point where the rates are down to their lowest level since April 2021.
“It’s not surprising to see the prices aligning across the corridors, as this was the case in early 2021, when there was little more than a USD 100 per FEU difference. What is startling is that a South East Asia container premium that stood at almost USD 4 000 in mid-September 2021 is, just one year later, back to zero. In fact, spot rates from China are slightly more expensive right now.”
Sand notes that the rates started to diverge in May 2021, when the global pandemic exerted severe pressure on all main trade lanes. The South East Asia corridor saw an unprecedented supply-demand imbalance, pushing prices through the roof.
“In January 2021,” he notes, “the spread was minimal, with spot rates from South East Asia standing at USD 4 360 per FEU and those from China at USD 4 290. However, by January 2022 prices from South East Asia to the US West Coast had climbed to a peak of just under USD 12 000, whereas those from China ‘only’ got to USD 8 700, peaking in March.
“However, it looks like it’s been a case of ‘the bigger they are, the harder they fall’, with rates from South East Asia following the overall global trend of decline, only doing so more drastically. We have to remember though, those rates are dropping from historical highs, so it certainly won’t be panic stations for the carriers just yet. We’ll continue watching the latest data to see if the trend continues and, crucially, how that impacts on the long-term contract market.”
Oslo-based Xeneta’s unique software platform compiles the latest ocean and air freight rate data aggregated worldwide to deliver powerful market insights. Participating companies include ABB, Electrolux, Continental, Unilever, Nestle, L’Oréal, Thyssenkrupp, Volvo Group and John Deere, amongst others.
This week saw Xeneta raise USD 80 million, valuing the business at USD 265 million. The move was led by funds advised by Apax Digital, the growth equity arm of Apax, a leading global private equity advisory firm, with participation from NY-based Lugard Road Capital. With the fresh funding in place, Xeneta will now aim to accelerate its growth, expand into new markets and continue scaling its global teams to meet demand from customers focused on supply chain resilience and the latest rates intelligence.