The Merchant - Trans-Pacific rates near pandemic-era highs as Golden Week looms

The essentials at a glance ⛽ Fuel surcharges cancel out any relief from falling oil prices

Figure of the week

$11,000 The trans-Pacific East Coast spot rate per FEU that major indexes have now recorded, a level last seen during the pandemic era. Rates are within 11% of their Covid-era highs on the East Coast and within roughly 18% on the West Coast, according to Xeneta.

Quote of the week

“If a freight rate record is broken, it is most likely to occur on the trade into US East Coast. But even if we do not see a new all-time high, the fact we are even discussing the possibility demonstrates how sensitive critical ocean container shipping trades are to geopolitical forces.” Peter Sand, Xeneta chief analyst, on the significance of still-rising trans-Pacific rates.

Trans-Pacific East Coast rates near pandemic-era highs as Golden Week looms

Trans-Pacific East Coast services have now surged beyond $11,000 per FEU , according to major indexes - a figure last seen during the pandemic era. Rates are now within 11% of their Covid-era highs on the East Coast and within roughly 18% of their pandemic-era highs on the West Coast, according to Xeneta. “If a freight rate record is broken, it is most likely to occur on the trade into US East Coast. But even if we do not see a new all-time high, the fact we are even discussing the possibility demonstrates how sensitive critical ocean container shipping trades are to geopolitical forces,” said Xeneta chief analyst Peter Sand. Asia-to-US East Coast container spot rates are now hitting levels not seen since the latter days of the pandemic. Shanghai-to-New York rates rose 7% this week. Yet many shippers remain desperate to secure space. The main reasons are constrained capacity and increasingly unreliable vessel schedules. The WCI Shanghai-to-Los Angeles leg, on the other hand, rose 5% week on week. The rising rates are a concern for shippers, but even more worrying are diminishing schedule reliability levels. This is caused by a mixture of congestion in Asian ports following a series of typhoons and an increasing number of blank sailings . With such unreliability, securing space is only part of the battle for shippers. Once they have secured it, they may still see their scheduled departure pushed back by several days. In some cases, industry insiders report total delays approaching two weeks when a booking rollover is combined with a delayed vessel departure. According to Drewry, carriers are due to blank nine trans-Pacific sailings next week, one more than last week. That means rates are likely to rise slightly as Golden Week approaches. The big question is whether the Golden Week factory shutdown will provide enough of a breathing space for Chinese ports to clear typhoon-related congestion. Currently, waiting times in Singapore stand at more than four days due to vessel bunching.

Fuel surcharges cancel out any relief from falling oil prices

Shippers, especially air freight importers, will be noticing rising surcharges on trans-Pacific services, even as oil prices start to fall this week. The destruction of a Saudi oil pipeline by the Houthis and rising tensions between the two groups have led to soaring fuel surcharges . For example, DHL Aviation’s ex-Hong Kong long-haul cargo fuel surcharge had risen about 80% in 11 weeks by September 21. On the other hand, air cargo spot rates on trans-Pacific lanes fell back slightly this week, as Asia-to-Europe rates started to surge. The latest data from the TAC Index found that performance on trans-Pacific lanes was increasingly lane-specific. Slight rises were seen out of Hong Kong, Shanghai, Bangkok, Hanoi and Malaysia , but rates were a little down from both Seoul and Taiwan on lanes to the US. Rates out of the US on lanes to Europe and China saw slight rises. Those to South America, the UK and Korea fell slightly. Overall, shippers will be well aware that year-on-year trans-Pacific rates are well up. While reported talks between the Trump administration and Iran have given rise to new hopes of a peace deal, shippers should not get their hopes up. So far, many rounds of diplomacy between the US and Iran have failed to yield lasting dividends, and it is unclear what is different this time. Easing rates, then, will probably be counterweighed by the prospect of further fuel surcharges.

Overcapacity threat looms once again

If shippers are currently counting the cost of overcapacity, particularly on the trans-Pacific trade, analysts’ longer-term forecasts may provide an element of relief. Writing in joc.com, Vespucci Maritime CEO Lars Jensen addressed forecasts originating in 2023 that authoritatively predicted significant overcapacity in 2024. The essence of Jensen’s argument was: yes, the analysts got it wrong. The market saw undercapacity rather than overcapacity throughout 2024 and 2025. But he pointed out that analysts had, unsurprisingly, not contended with the Red Sea crisis . Houthi attacks on shipping in the Red Sea forced carriers to go around the Suez Canal, soaking up much of the excess capacity that would otherwise have hit the market. What does this mean for shippers here and now? The fact is this incoming overcapacity is still likely to hit the market. Underlying demand growth since 2023 has amounted to around 23% . In the same time, the global container fleet has grown 41% in terms of TEUs. Barring other unforeseen black swan events, container shipping will almost inevitably find itself dealing with significant overcapacity before too long. However, some analysts are still arguing that carriers will be able to manage the order book going forward to keep capacity tight. Jensen believes this is unlikely. For that to happen, the Red Sea crisis would have to start impacting container shipping again. At present, capacity is increasingly returning to a Suez routing. It would also require 50% of all vessels older than 20 years to be scrapped, a significant cleanup of port congestion, and rising growth in demand. Shippers, he says, can expect considerably greater capacity - and therefore more bargaining power - if these events fail to occur.

Did you know?

MSC’s dominant capacity share on the transatlantic trade has let it charge higher rates than Gemini Cooperation vessels. New analysis by Xeneta shows MSC sustained an average rate premium of $63 per FEU above the market, compared with $130 below the market for Maersk. ❓ Got a question about your flows? We answer it in an upcoming edition.

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Sources

• The Journal of Commerce - Container shipping overcapacity nearly inevitable barring black swan, analyst says
• The Loadstar - Continued fuel price shocks leave emergency surcharges stuck in overdrive
• The Journal of Commerce - Flexible deployments help MSC to sustain trans-Atlantic rate premium, Xeneta
• FreightWaves - Asia-US container rates soar past $11,000, near pandemic records
• The Loadstar - Transpacific spot rates top $10,000 as Asia-Europe slide accelerates
• The Loadstar - No post-peak relief for ocean freight as capacity tightens