[230320.EN.BIZ] Backhaul US, Europe Box Shipping Rates Go Up, Headhaul Rates Hold Constant

A CAPACITY shortage is looming over cargo shipments due to the outbreak of the coronavirus that triggered the cancellation of a stack of fronthaul containership sailings from China to the US and Europe. As forewarned, this is causing a capacity crunch for cargo heading in the opposite direction. And, as a result, rates are predictably starting to soar.

Copenhagen-based Sea-Intelligence calculates that a total of 77 containership sailings have been blanked due to the coronavirus, including 48 transpacific and 29 Asia-Europe sailings.

According to Freightos chief marketing officer Eytan Buchman: "The record cancellation of sailings has backhaul rates on many routes already starting to climb. These blankings also mean that whenever production [in China] does pick up, capacity will likely be tight, not only because there will be fewer ships but also because many empty containers have been stranded outside of China."

Between February 28 and March 4, rates on the North Europe-China route rose by 46 per cent; rates on the Mediterranean-China route were up 22 per cent; rates on the North America east coast-China route increased by seven per cent; and rates from North America's west coast to China expanded by four per cent, New York's FreightWaves reported.

The takeaway from this index data is that backhaul rates are rising across the board, but much more so from Europe than from the US, at least so far.

On the other hand, the recent rate trend in the fronthaul markets is totally different. Between February 28 and March 4, rates on the China-North Europe route fell by 4.3 per cent; China-Mediterranean pricing was down 0.5 per cent; China-North America east coast pricing remained flat; while China-North America west coast pricing rose by 2.7 per cent.

This means that the headhaul rates haven't changed that much, likely because coronavirus is limiting outbound cargo volumes, so there's nothing pricing can do to impact volume one way or the other.

But even as headhaul pricing remains relatively constant, the fallout for US importers is rising.

According to Mr Buchman: "A sample of surveyed Freightos.com marketplace users shows that for many US SMB [small- to medium-size business] importers from China, the shutdown has already had a negative impact on inventory (78 per cent answered in the affirmative) and bottom lines (66 per cent). How disruptive and expensive the comeback will be for US importers will depend on how quickly production and ports clear the backlog."

The good news, he explained, is that "Chinese manufacturing took definite steps towards normal this week as quarantine periods in many areas came to an end and travel restrictions were eased.

"The vast majority of factories are back online, with many operating at as much as 80 per cent capacity. Inter-province trucking, which last week was a major pain point, has also benefitted from these developments and is now operating at about 80 per cent capacity as well. Nearly all major ports are likewise coming to life."

Source : HKSG.