Transpacific Contract Rates Rise

Industry Grapples with Supply Challenges amid Strong US Imports


In the wake of the conclusion of the initial tranche of transpacific contracts for the period spanning May 2024 to April 2025, analysts at Jefferies have furnished insights indicating an upward trajectory in Asia-US west coast rates. These rates are reported to have ascended to the range of $1,400 to $1,500 per forty-foot equivalent unit (feu), marking a notable escalation from the $1,200 to $1,300 per feu range observed in the preceding year. Notwithstanding, these figures bear proximity to break-even levels, underscoring the maritime industry’s ongoing struggle to secure more robust long-term rates, particularly in light of prevailing supply dynamics, despite the unexpectedly robust market performance recorded thus far in the current year.

According to a recent shipping markets update from Jefferies, the latest contractual agreements manifest a nuanced spectrum, with large beneficial cargo owners (BCOs) anticipated to secure rates below the aforementioned range, while smaller BCOs are poised to negotiate rates within this bracket. Hua Joo Tan, co-founder of Linerlytica, an Asia-centric container advisory entity, elucidated that the $1,400 to $1,500 range mirrors the remuneration liners were attaining through spot market transactions in 2019, antecedent to the onset of the COVID-19 pandemic.

Tan further expounded on the intricacies of this year’s contract negotiations, characterizing the process as protracted and arduous, exacerbated by factors such as Red Sea diversions and a conspicuous overcapacity conundrum precipitated by the incessant influx of newbuild deliveries into the container fleet, averaging more than one per diem in the present year.

In tandem with the contractual deliberations, recent data from Descartes underscores the robustness of the American economy, with a notable surge in imports recorded. Descartes reports a 21% year-on-year increase in US imports, with March 2024 figures indicating a continuation of the buoyant trend that commenced in January of the same year, pre-dating the COVID-19 pandemic.

However, amidst these developments, Sea-Intelligence, a Danish liner consultancy, has highlighted a pronounced volatility in capacity, attributing it to a myriad of factors that have impeded the preservation of a stable pricing milieu. According to Sea-Intelligence, pricing dynamics in the maritime sector exhibit asymmetry, with downward rate pressures exacerbated by an unstable capacity landscape, perpetuating a cycle of rate depreciation.

In summary, while transpacific contract conclusions have witnessed a nominal uptick in rates vis-à-vis the previous year, the prevailing market conditions bespeak a nuanced tapestry of challenges underscored by supply-side vagaries and demand-side resilience, indicative of an industry grappling with the imperatives of equilibrium amidst flux.

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