Shippers warned: spot rates no pointer to wider box shipping market

Spot rates have become more volatile, relative to the wider box shipping market, since the pandemic, with overall prices increasingly diverging from signals provided by the spot market.

In its latest analysis, Sea-Intelligence, compared spot rate movements on the Asia-Europe and transpacific trades with broader market developments, using World Container Index (WCI) and Container Trade Statistics (CTS) data. 

The consultant compared monthly average WCI rates for Shanghai-Rotterdam and Shanghai-Genoa with CTS data for Asia-Europe. For the transpacific, it looked at Shanghai-New York and Shanghai-Los Angeles rates. 

Its findings suggest spot rates have become a less reliable indicator of a total market – which includes both spot and contract freight pricing – than they were before the pandemic. 

On both tradelanes, the indices remained closely correlated, the CTS rate index following the WCI by approximately one month. Sea-Intelligence used this relationship to forecast the overall market rate index from spot rate movements, and then compared its predictions with the actual CTS figures. 

Before the pandemic disruptions, Sea-Intelligence found, the difference between forecast and actual market rates fluctuated relatively little, suggesting spot rates provided a reasonably reliable indication of wider market developments. 

However, deviations became substantially larger from 2020, which the analyst said reflected a greater disconnect between spot rate movements and the market as a whole – also evident when fluctuations were measured relative to overall rate levels, meaning it could not simply be attributed to higher freight rates. 

The consultant found similar patterns on both Asia-Europe and transpacific trades. 

Sea-Intelligence also identified a gradual upward trend in the difference between forecast and actual rates on Asia-Europe, indicating that the overall market increasingly recorded higher rates than would have been predicted from spot prices alone. 

It stressed that the findings did not, however, demonstrate that contract rates had become more stable in absolute terms. 

“The data merely shows that spot rates have become more volatile than the market totality,” Sea-Intelligence explained, and suggested the divergence could reflect greater ability among shippers and carriers to tactically “take advantage of” whichever supply and demand conditions prevailed in a given week. 

For shippers, the analysis also highlighted the limitations of using spot indices alone to assess overall freight market conditions, particularly when negotiating contracts.