SHIPPING: Asia-US container rates plunge on Lunar New Year holiday lull

HOUSTON (ICIS)–Rates for shipping containers from east Asia and China to the US plunged this week, as did global average rates amid the typical slowdown around the Lunar New Year (LNY) holiday.

Meanwhile, shipowners are out with surcharges on various trade lanes, which could support rates at current levels even with the slowdown in volumes.

Global average rates fell by 11% according to supply chain advisors Drewry and as shown in the following chart.

Rates from Shanghai to Los Angeles fell by 8%, while rates from Shanghai to New York fell by 7%, as shown in the following chart.

Drewry expects spot rates to decrease slightly in the coming week on the back of the Chinese Lunar New Year holidays.

Rates from online freight shipping marketplace and platform provider Freightos also showed decreases, with a 10% fall from Asia to the West Coast and a 3% drop to the East Coast.

Judah Levine, head of research at Freightos, said the lull around LNY is pressuring rates lower.

CMA CGM has announced a congestion surcharge of $300/FEU originating from Callao and San Antonio to the US East Coast and US Gulf.

Global shipping major Maersk announced peak season surcharges of $1,000 for all sizes of containers for shipments from Middle East countries to the US and Canada East Coast, effective 1 February.

Hapag-Lloyd has announced peak season surcharges of $600/container from Chile to Asia.

Container ships and costs for shipping containers are relevant to the chemical industry because while most chemicals are liquids and are shipped in tankers, container ships transport polymers, such as polyethylene (PE) and polypropylene (PP), are shipped in pellets.

They also transport liquid chemicals in isotanks.

RETURN TO SUEZ CANAL NOT IMMINENT
While the ceasefire agreement between Israel and Hamas led to some optimism that transits through the Suez Canal could resume, passage of commercial vessels through the waterway are not imminent.

Levine said there remains skepticism among shipping analysts that the Houthi rebels will refrain from attacks on commercial vessels in the Red Sea even during the first stage of the ceasefire.

Negotiations on the second phase of the agreement are scheduled to begin on 5 February.

Levine said ocean carriers do see the ceasefire as a promising first step, but only CMA CGM has said it will increase its use of the Suez Canal.

Most carriers will not take the costly and complicated concrete steps to return to the Red Sea until they are confident that the route is and will remain safe.

Many shippers and freight forwarded are also hesitant to change course.

Peter Sand, chief analyst at ocean and freight rate analytics firm Xeneta, said carriers will want assurance they have safe passage for crews and ships in the long term and that the situation will not suddenly deteriorate.

PANAMA CANAL
President Donald Trump surprised some when he said that the US should reclaim the Panama Canal.

A US congressman has since introduced a bill that would authorize the purchase of the Panama Canal.

The US is the largest user of the canal, with around 70% of all traffic heading to or coming from US ports. About 40% of US container traffic use the canal.

The US relinquished control of the canal on 31 December 1999 in The Panama Canal Treaty, signed by then US President Jimmy Carter.

Panamanian President Jose Raul Molino said the treaty, along with The Treaty Concerning the Permanent Neutrality and Operation of the Panama Canal, established the permanent neutrality of the Canal, guaranteeing its open and safe operation for all nations.

The Panama Canal remains the primary route for trade between Asia and the US Gulf and East Coast.

LIQUID TANKER RATES
US chemical tanker freight rates assessed by ICIS were largely stable week on week, with just the USG to Brazil trade lane seeing a slight increase on smaller volumes but overall unchanged. The market remained quiet this week, with COA volumes steady.

For cargoes moving in and out of South America some space remains available, capping the gains seen on the week. Strong interest that was seen over the past two months is waning, which is likely to put additional pressure on freight rates.

Volumes from the US continue to flow, but cargo moving into Asia is slowing because of the Lunar New Year holiday. However, monoethylene glycol (MEG) and ethanol entered the market for February loading.

A different scenario is playing out on the transatlantic eastbound route where February loading space is already available for spot but on a limited basis.

On the other hand, there seems to be a lot of interest on the USG to India trade lanes as there is a lot of lube oils interest for January with limited spot space remaining as owner await COA nominations.

Several inquiries were seen for methanol, ethanol and vinyl acetate monomer (VAM).

Additional reporting by Kevin Callahan