For the first time since mid-2008, average global container freight rates experienced a year-on-year increase in late 2009, according to a report from U.K.-based consulting firm Drewry. The Drewry Global Freight Rate Index recovered by 3% in the year to November 2009, after collapsing the first half of 2009, increasing by 18% between July and September 2009 and rising by another 6% between September and November 2009.
Between September and November, the global “all-in” container freight rate index rose from $2,040 per 40-ft container to $2,160, maintaining a trend of price rises that has lasted for more than six months. However, recent average global freight rates in late 2009 were still about 20% below the peak of 2007.
“On routes such as Asia to Europe, the year-on-year increase in spot rates amounts to at least 40% and we know from shippers that they are asked to agree to much higher freight rates under annual contracts renewed in early 2010,” says Philip Damas, director of Drewry Supply Chain Advisors. “January and February are a critical period for many shippers because a high proportion of annual contracts are renewed then.” Some shippers, he points out, are worried that they will be asked to pay higher freight rate levels and are unsure whether the requested rates are at or higher than market benchmark levels.
Drewry believes that the potential for further increases in spot freight rates is now generally limited, except for the transpacific trade. Drewry’s consultants expect a sharp increase in spot transpacific rates from mid-January, as new capacity reductions can still stimulate some significant rate recovery in that trade. A tighter supply-demand balance should push up transpacific spot rates in early 2010 despite the growing percentage of the fleet being laid up.
Contrary to spot rates, contract freight rates are expected by Drewry to go up significantly, when compared to the low levels of previous contract deals. With spot freight rates now consistently higher than a year ago on most trade routes, contract negotiations taking place in early 2010 will be influenced by a different market environment and upwards pricing pressures. Drewry has forecast for some time that average container freight rates, including fuel surcharges, will be about 15% higher in 2010 than in 2009.
Whereas import spot rates to Europe have continued to rise between September and November, the same cannot be said about import spot rates to the US, which have remained stable at low levels, so far.
Carriers have announced further rate increases on the Far East-to-North Europe route for January or February, typically of $250 per TEU, and also plan to raise Asia-to-U.S. freight rates effective January 15.