Asia-Europe Spot Rates Could Exceed US$20,000 for 40' Containers

Asia-Europe Spot Rates Could Exceed US$20,000 for 40' Containers

Continued demand from shippers driving up spot prices

Spot rates continued to skyrocket last week making shippers anxious about further acceleration and how high the rates may go.

According to Sea Intelligence, prices will increase until sufficiently many shippers cannot afford to ship their goods. This will lower container demand, to the point where it matches the available vessel capacity. But the actual level where this happens is not known.

But how high can container shipping rates go? Maximum levels seen during the pandemic would be good indicator. This, however, does not account for the increased round-Africa sailing distances required today thanks to the Red Sea crisis.

Figure 1
Figure 1Sea Intelligence

To account for the longer sailing distances one needs to look at the rates in relation to the distance sailed, i.e. US Cents/FFE for each nautical mile (nm) sailed.

For the pandemic, this is shown in Figure 1 which indicates that during times of severe distress, freight rates per nautical mile can reach these very high levels.

If this data were extrapolated to find out how high the market can indeed go based off the pandemic surge in rates, we can now apply the new (longer) sailing distances and calculate how high the spot rates per FFE could possibly go, if the current crisis persists.

Figure 2
Figure 2Sea Intelligence

The result of this calculation is shown in Figure 2 and this does not paint a pretty picture for shippers.

If the rate paid per nautical mile reaches the same level as during the pandemic, we will see spot rates of US$18,900/FFE from Shanghai to Rotterdam, US$21,600/FFE from Shanghai to Genoa, and US$2,200/FFE on the back-haul from Rotterdam to Shanghai.

This calculation, however, does not preclude shipping rates from going even higher in the coming weeks.

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