This week's update is centered around the trading activities between South East Asia (SE Asia) and North Europe. We will delve into the factors that are driving new collaborations in the Asian region and the West and explore how global trade is being affected by geopolitical ties and world events. It is crucial for shippers who are considering adjustments to their supply chains to stay aware of these developments. We will pay particular attention to the spread that is emerging between long-term rates from these two regions.
An examination of the long-term rates for the SE Asia to North Europe and Far East to North Europe trades reveals that both have surged in unison with the global market, achieving record-breaking levels. These trades have demonstrated a strong correlation, with closely aligned movements that seldom deviate.
Currently, the noteworthy aspect to observe is the pricing at the beginning of Q2 this year. According to the graph, there is an emerging discrepancy in the prices of the two trades. Specifically, long-term rates from SE Asia to North Europe have increased, while those from the Far East have experienced a slight decrease. As a result, the spread between the two long-term rates has widened to USD 710 per FEU, which is the most substantial difference observed since January 2022.
During the past couple of years, the two trades had exhibited comparable patterns and moved in unison with each other. In mid-2022, both trades achieved their peak rates, but starting from August of that same year, both trades began to decrease in value and have continued to do so.
The most significant reduction in price for both trade lanes occurred in December, resulting in closing the year with prices of USD 6500 for the SE Asia Lane and USD 6900 for the Far East Lane. However, the prices plummeted even further at the start of the new year, with the SE Asia Lane starting at USD 3270 and the Far East Lane at USD 2900.
The price hike from the SE Asia trade lane has been gradual since the start of the year. Based on data from Container Trades Statistics, container traffic from SE Asia to North Europe has decreased at a relatively modest pace of 4.8% compared to the previous year. In contrast, container movements from the Far East to North Europe have experienced a substantially steeper decline of 17.45%.
In conclusion, the SE Asia trade has observed a rise in long-term contract prices despite lower container movements, while the FE Asia trade has seen a decline in both container movements and long-term contract prices. It remains to be seen if this trend will continue in the upcoming months and if the spread between the trades will increase or stabilize. As such, shippers should closely monitor the pricing spread between the trades, especially if they are considering alternative commercial partners for their supply chains as part of the "friendshoring” trend. The global trade landscape is constantly evolving, and staying informed and proactive is crucial for those involved in international trade.
The 'Weekly Container Rates Update' blog analysis is derived directly from the Xeneta platform. In some instances, it may diverge from the public rates available on the XSI ®-C (Xeneta Shipping Index by Compass, xsi.xeneta.com. Both indices are based on the same Xeneta data set and data quality procedures; however, they differ in their aggregation methodologies.
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