Container freight rates heading up in early 2010

Late 2009 rally driving global container freight rates up

Dave Hannon -- Purchasing, 1/20/2010 1:23:29 PM

Average global container freight rates saw a major rally in late 2009, according to Drewry's most recent Container Freight Rate Insight report, and global 2010 rates will continue up.

After collapsing the first half of 2009, the Drewry Global Freight Rate Index increased by 18% between July and September and rose by another 6% between September and November. According to Drewry, the global "all-in" container freight rate index rose from $2,040 per 40-foot container to $2,160 from September to November.

Spot rates spiked as much as 40% in some lanes, including Asia to Europe, while spot rates to the U.S. have remained more stable of late. "We know shippers are asked to agree to much higher freight rates under annual contracts renewed in early 2010," said Philip Damas, director of Drewry Supply Chain Advisors, in the report.

Drewry believes that the potential for further increases in spot freight rates is now generally limited, except for the transpacific trade, where spot rates will increase as new capacity reductions continue to prop up rate increases. "A tighter supply-demand balance should push up transpacific spot rates in early 2010 despite the growing percentage of the fleet being laid up," Drewry said.

But in contrast to spot rates, contract container freight rates are expected by Drewry to go up significantly. Shippers going into negotiations in early 2010 have spot freight rates now consistently higher than a year ago on most trade routes and other upward pricing pressures in play. Drewry has forecast for some time that average container freight rates, including fuel surcharges, will be about 15% higher in 2010 than in 2009.

As reported on Purchasing.com recently, Drewry is forecasting a 3.4% increase in global container traffic this year. And as a result, "Carriers have to substantially improve revenues in 2010 and this means that the transpacific rate negotiations with shippers this year are the most crucial ever."

According to Drewry, rates in the east-west transpacific container lanes sank more than 26% last year but carriers will be able to get as much 14% of that this year.