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Drewry Hong Kong-Los Angeles Box Rate Jumps by 14%

Related Publications:
CFRI Tier 1 Container Freight Rate Insight

London, UK, 14th March 2012. The Drewry Hong Kong-Los Angeles container rate benchmark published in the latest Container Freight Rate Insight report increased by 14% to US$2,013 per 40ft container this week, showing that the carriers' announced US$300 rate increases have been fully implemented.

The general rate increase is due to be effective tomorrow and has already been accepted by the market for bookings starting tomorrow.

The Drewry Hong Kong-Los Angeles rate was $1,771 last week. The previous increase in the rate was during the first week of 2012, when carriers pushed through a weekly rate increase of about $400 relative to the last week of 2011.

"Although demand growth in the eastbound transpacific remains muted, ship utilisation has tightened following reductions in capacity during the slack season, causing the last two jumps in eastbound spot freight rates," said Philip Damas, director at Drewry. He added: "Higher fuel prices have also added inflationary pressure on this market price, which includes the carriers' bunker adjustment factor".

The current spot rate is now 18% above the 2011 full year average and 13% higher than the 2006-2011 historical average rate.

Damas cautioned: "It remains to be seen whether annual service contract rates in the May 2012/April 2013 season will harden substantially, relative to the previous season, as planned capacity increases for the peak season may lower utilisation levels. Much still depends on carrier capacity decisions."

The Drewry Hong Kong-Los Angeles container rate benchmark, tracked by Drewry since 2005, is the most frequently used index in index-linked contracts, according to the Federal Maritime Commission. The index is also the oldest container freight rate index in the industry.

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In container shipping, inland freight costs for products shipped from China to Europe and the US often exceed port-to-port freight costs (and will rise faster for years to come).