The dust is settling on the first batch of transpacific container shipping contracts for the May 2024 – April 2025 period, and analysts are painting a mixed picture. While rates are up slightly from last year, they remain far below current spot market prices and carrier expectations. This raises questions about the sustainability of current pricing and the potential for a correction in the transpacific market.
Here’s a breakdown of the key takeaways:
- Rates Up, But Not By Much: Jefferies reports Asia-US west coast rates settled in the $1,400 to $1,500 per feu range, compared to $1,200-$1,300 last year. However, this is significantly lower than current spot rates exceeding $3,000 per feu.
- Liners Struggle for Leverage: Jefferies highlights the inability of carriers to capture stronger long-term contracts despite a robust market, pointing to an oversupplied container market with constant newbuilds entering service.
- Tiered Contracts Emerge: Linerlytica notes different contract tiers, with large beneficial cargo owners (BCOs) potentially securing rates below $1,400, while smaller BCOs land closer to the $1,400-$1,500 range. This reflects the carriers’ struggle to negotiate higher rates across the board.
- Spot vs. Contract Rates: The contracted rates are roughly equivalent to what carriers earned on the spot market in pre-pandemic 2019. This suggests a potential return to pre-pandemic pricing for long-term contracts.
- US Import Strength: Despite carrier woes, US import demand remains strong. Descartes reports a 21% increase in US imports (2.1 million TEU) compared to pre-pandemic March 2019.
- Capacity Chaos and Pricing Volatility: Sea-Intelligence emphasizes the disruptive impact of fluctuating container capacity on pricing stability. They argue for a downward pressure on rates due to the difficulty of raising prices in an unstable market.
The Bottom Line:
Transpacific shipping contracts for 2024-2025 suggest a potential cooling off from the record-breaking spot rates of 2023. While carriers may have hoped to capitalize on a strong market, overcapacity and negotiating power from shippers appear to be limiting their leverage. The question remains: will spot rates follow suit, or will the market maintain its current volatility? Stay tuned for further updates on this evolving situation.
