The spot rate for shipping a 40-foot container from Hong Kong to Los Angeles stood at $1,268 last week for the third straight week.
The spot rate for shipping a 40-foot container from Hong Kong to Los Angeles stood at $1,268 last week for the third straight week, according to an index published by London-based Drewry Shipping Consultants. While that rate is down 28.2 percent from the same week in 2008, it is in line with the spot rates that have been in effect since August in the eastbound Pacific. That indicates rates in the busiest U.S. trade lane have stabilized.
The Drewry Hong Kong-Los Angeles container rate benchmark is significant because it reflects the trend of overall freight rates in the eastbound Pacific. Most rates are negotiated in confidential service contracts between carriers and their customers and are higher than the spot rates because the contracts stipulate carriers must adhere to certain service requirements.
The spot rate stood at $1,767 per FEU in late 2008, but freight rates plummeted after that because of the global economic recession and the collapse of world trade. The downward spiral continued from late 2008 until the end of July 2009, when the spot rate hit an astounding low of $871 per FEU.
Container lines in the eastbound Pacific then demonstrated resolve to stop the bleeding and prevent bankruptcies in the industry. The spot rate jumped to $1,300 per FEU in the week of Aug. 9 and has remained in the range of $1,486 to $1,268 since.
The next few months will be a critical period for container lines because the post-holiday months are traditionally the slowest period of the year for U.S. imports from Asia. Drewry estimates carriers this year will lose a cumulatively $20 billion in their global operations.
Although there have been no significant bankruptcies this year, carriers warn that they must prevent further deterioration of rates if they are to maintain current levels of service. Customers have complained that carrier cost-cutting strategies, which include eliminating some service strings and port calls, have played havoc with their supply chains.