Shippers are seeing record increases in container freight rates as part of another swing in an increasingly volatile container shipping spot market. In the past year, Drewry's regional container freight rate index for European imports plunged from US$3,169 per 40-foot container in July 2008 to a low point of US$1,071 in March, before shooting up to US$1,812 in July 2009, according to Drewry's latest Container Freight Rate Insight report.
Similarly, in the past year, Drewry's global freight rate index for container shipping has fluctuated between a maximum of US$2,727 per 40-foot container (in July 2008) and a minimum of US$1,536 (in May 2009).
Just recently, on the Far East-Europe route, most all-in spot rates increased by more than 50 percent between May and July, although from a very low base.
"The extreme volatility of the spot container shipping market is an industry issue not just for shippers, who cannot forecast their transport costs or their products' total landed costs, but also for container shipping companies and forwarders," said Philip Damas, Director of Drewry Supply Chain Advisors.
Shippers have increasingly been contacting Drewry's specialist supply chain consultancy arm to obtain international logistics advice and market intelligence on issues triggered by freight rate volatility.
The standard deviation for the regional freight rate index of European imports, a measure of volatility, reached US$805 per 40-foot container between July 2008 and July 2009, as compared with about US$450 in each of the past two years, as rates dived and then experienced a sharp upwards correction.
"This volatility looks even more acute than that of the stock market, and makes it extremely difficult for shippers to know what a fair price is in today's spot market," Mr Damas said.
The regional container freight rate index for imports to Europe is now back to the level of the end of 2008, while the Drewry global freight rate index is back to the level of about January 2009, thereby reversing the rate falls seen earlier this year.
The removal of capacity by carriers in the Asia to Europe trade has led to capacity shortages, roll-overs and a complete shift in the bargaining power of spot shippers and carriers on this route. Carriers are exploiting the potential to negotiate rate increases in return for peak-season capacity guarantees.
Between May and July, the two regional price indices for the US (US import rates and US export rates) stabilised overall, after their recent period of decline, and Drewry recorded large increases in transpacific eastbound spot freight rates in early August.