Container freight rates from North Asia to the UK have risen significantly and are expected to see further upside ahead of the New Year as the deadline for the UK leaving the EU customs union looms large and UK-based importers seek to fill warehouse space ahead of this event.
With fewer than 50 days to go until the UK formally leaves the EU customs union, and with the picture still murky as to what shape the future relationship will take, importers are seeking to bring in goods ahead of the deadline in an effort to be well prepared for a potential no-deal scenario, which would see the UK leave the customs union with no formal deal in place.
This has resulted in a significant spike in demand in recent weeks, leaving container rates from North Asia to the UK significantly higher.
"There is a lot of front-loading ahead of Brexit at the moment," a UK-based carrier source said. "With people locked down across the continent, there has been another spike in home working equipment alongside DIY equipment."
This increase has also come alongside significant increases in spot freight demand for PPE in the current pandemic, a key driver in the market and one that has supported demand throughout the year as volumes for garments in particular have slumped, given the lower volumes of in-person shopping across the European continent.
On top of this increase in demand come logistical problems at UK ports, which are struggling to deal with the influx of demand, resulting in significantly longer wait times at UK ports, further affecting the rising freight rates. Some carriers are imposing congestion surcharges on this route on top of the already rising base ocean freight rates.
Platts Container Rate 11 – North Asia-to-UK – was assessed at $2,600/FEU on Nov. 16, up from $2,000/FEU a month earlier. Carriers expect this to increase further, with Peak Season Surcharges (PSS) announced from Dec. 1 of up to $1,000/FEU, and General Rate Increases (GRIs) on the base rate currently in the region of $5,000/FEU for Dec. 1 implementation.
"There is no hope for shippers to get low rates now until the end of Q1; carriers will manage capacity to ensure strength into the New Year," a carrier source said, predicting rates would remain firm well into the New Year.
Piling on further misery for carriers is an ongoing equipment shortage in Asia. This has stemmed from a lack of empty boxes at key exporting hubs, owing to the delay in returning these boxes as ports and importers operate skeleton staff levels during the pandemic.
This has meant carriers are keen to return empty boxes to North Asia to clear the demand backlog that they are continuing to try and reduce, and so back haul rates have not seen the same upside as head haul rates on these routes.
