Container rates from Asia to Europe and the US increasingly diverge

Container rates from Asia to Europe and the US are increasingly diverging, with rates to Europe falling while those to the US continue to rise. Despite increased security risks, carriers continue to return to the Suez Canal. However, renewed tensions in the region could disrupt this return, while dwindling global oil inventories pose another risk to the container shipping market.The Drewry World Container Index increased 1% this week. The largest increase was recorded on the Shanghai–New York route, where container rates have risen by 7%. This takes rates above $10,000 per 40-foot container, more than double the rates seen at the end of May this year. Since then, container rates on the various routes have increasingly diverged.Rates from China to the European destinations of Genoa and Rotterdam have started to fall again after rising considerably from early July, while rates to the US continue to increase. Since the end of May, rates from Shanghai to Rotterdam have risen by 27%, while those to Genoa have fallen by 6%. By contrast, rates to New York have increased by 126% and those to Los Angeles by 122%.Weak demand and the gradual return of services via the Suez Canal are weighing on Asia–Europe rates, according to Drewry. Even when adding up the higher insurance fees the Suez-Canal passage remains cheaper than other options. Despite tighter capacity and continued congestion in Asia, rates on the Asia–Europe trade are falling as demand remains weak. Return to the Suez CanalAccording to Sea-Intelligence estimates cited by Freightos, more than a quarter of Asia–Europe capacity is expected to sail via the Red Sea in September, although the return of Asia–North Europe services remains relatively slow compared with Asia–Mediterranean services.Carriers are reducing capacity on the transpacific trade through blank sailings ahead of China’s Golden Week. Combined with an expected increase in demand, this is likely to push container rates slightly higher, according to Drewry. This would widen the divergence further, as Drewry expects rates on the China–Europe trade to decline slightly again next week. This does not necessarily mean that rates on the China–Europe trade will continue to fall in the following weeks. Drewry says renewed security risks in the Red Sea could slow the return of services via the Suez Canal, while possible German port strikes and continued congestion in Asia could put upward pressure on rates.Dwindling global oil inventoriesWith the conflict in the Middle East escalating and dwindling global oil inventories, bunker fuel is also a concern. The International Energy Agency (IEA) reported today (18 September) that global oil inventories are now 507 million barrels lower than at the start of the Iran war. The IEA expects prices to rise further if supply remains constrained.