SCFI holds above 3,300 as US lanes firm and Europe slips: USEC at $9,568/FEU

The Analysis

Shanghai to Los Angeles, Shanghai to New York, Shanghai to Rotterdam, Shanghai to Genoa, Shanghai to Jebel Ali. One port, five roads out, and on 14 August the composite for the Shanghai market printed at 3,355.24 points, up 2.4% on the period. That reads like one number about one thing. It is not. Those five roads are doing five different things right now, and the differences are the only part you can actually carry into your own book.

I have spent too many years standing on quays and in rail yards to trust a composite. An index is a summary of a road system, not a road. The number that matters to you is the one you can book, on the lane you use, on the day you load. So let me read this week's print the way I read a corridor map, node by node and leg by leg, and leave the rate-desk arithmetic to the people who do it better than I ever will.

Start with what actually moved, because the headings matter more than the total. Shanghai to the US West Coast rose 3.5% to $6,714 per FEU. Shanghai to the US East Coast rose 3.0% to $9,568 per FEU. Shanghai to Europe eased 0.6% to $2,945 per TEU. Shanghai to the Mediterranean slipped 2.9% to $3,929 per TEU. And Shanghai to the Persian Gulf added 3.1% to $5,422 per TEU, still carrying the weight of Middle East tensions and long diversions. Two roads into North America firmed. Two roads into Europe softened. One road into the Gulf got longer and more expensive. That is not one market. That is five roads pointing in two directions at once.

I do not read that as a price story, I read it as a routing story. When a road firms, it firms because more traffic wants it, or because less traffic can use it, or because the capacity that used to serve it went somewhere else. When a road softens, the same three possibilities run in reverse. You cannot tell which without looking at the map, and the map this week is telling a very specific thing.

The node that decides everything here is the Suez corridor and the water on either side of it. Asia to Europe used to be a short, cheap, predictable hop through that node. With the Middle East strain and the long diversions around the Cape, that hop turned into a much longer loop. A longer loop does not just cost more fuel. It eats time, and time is the one thing a fixed fleet cannot make back. If one ship needs more days to complete a round trip, that ship delivers fewer round trips a year, and the very same fleet is now producing less capacity than the schedule on paper promises. That is the quiet arithmetic behind every diversion: the loop lengthens, the voyage count drops, and the effective capacity of the whole fleet thins even on lanes that never touch the trouble.

That is why the two North American roads firmed while the two European roads eased, and it is why you should stop looking at this as a rising or falling market. Carriers move ships to where they earn. When the Asia-Europe loop gets longer, the Europe and Mediterranean roads lose effective capacity to the diversion, but they also lose the argument for keeping the newest, fastest tonnage on them, because the round trip no longer pays the way it did. That tonnage looks at a Pacific crossing instead, where the loop is shorter and the traffic is firmer, and it goes. So you get exactly what the print shows: the US lanes tightening as capacity is drawn toward them, and the European lanes loosening as capacity is drawn away, while the raw demand into Europe may not have moved at all. The road did not get busier. The road got reassigned.

Now look at the gap between the two American roads, because it is the most misread number on the page. US West Coast sits at $6,714 per FEU, US East Coast at $9,568 per FEU. The difference is $2,854 per box. Too many people read that as the East Coast simply being more expensive, as if there were a premium attached to the address. There is not. That $2,854 is the price of a longer road. To reach the East Coast you either sail further through the canal or you land on the West Coast and hand the box to an inland leg by rail or truck. Either way you are buying distance and you are buying a second mode, and the second mode has its own rate, its own fuel surcharge, its own chassis and its own free time. The ocean number you see is only the ocean half of the road. The rest of the road shows up on somebody else's invoice.

Here is the trap that almost nobody flags in the headline, and it is the one I would circle in red. The US lanes are quoted per FEU, a forty foot container. Europe and the Mediterranean are quoted per TEU, that is a twenty foot equivalent. One FEU is two TEU. You cannot lay those two columns side by side and read them at face value, and yet that is exactly what a lot of buyers do, because the numbers sit next to each other in the same table and the eyes do the rest. Convert them and the picture changes.

Northern Europe at $2,945 per TEU is roughly $5,890 per FEU equivalent. The Mediterranean at $3,929 per TEU is roughly $7,858 per FEU equivalent. On a like for like forty foot box, that is a spread of about $1,968 between the two European roads, and it is a spread that the headline number hides completely because the second decimal place of a per TEU quote looks small and the first digit of a per FEU quote looks big. The unit you quote in is doing more work than the percentage you quote.

The Mediterranean road is the clearest case of a road that looks expensive but may still be the right one. $3,929 per TEU, down 2.9%, means the road into southern Europe is both softer than it was and longer than the road into the north. For a distribution centre in southern Europe, the direct Mediterranean call saves an entire inland leg that a northern gateway would charge you for. So the per TEU number being higher is not automatically the wrong answer. It is a different road with a different last mile, and the only honest comparison is door to door, per box, with the inland leg priced in on both sides. I have watched shippers save money by paying a higher port to port rate precisely because they stopped paying for the inland stretch. And I have watched others lose money doing the exact same thing because they forgot the inland stretch on the other end.

Then there is the Persian Gulf road, and this is the purest node story on the page. $5,422 per TEU, up 3.1%, still working through the Middle East tension and the long diversions. This is the one lane where I do not need to guess at the cause, because the summary tells me straight: the road itself got physically longer. Jebel Ali and the Gulf ports used to be fed by a short hop through a corridor that is now compromised. Ships take the long way, and the long way is not free and it is not fast.

Every extra day on that road is a day your inventory floats, a day your letter of credit clock runs, a day your warehouse plan has to absorb. A 3.1% rise on a lane that is already the highest per unit here is not a rounding error. It is the toll on a detour that has not gone away, and the people who feel it hardest are the ones who promised a date to a customer based on the old, shorter schedule.

So let me put numbers on the two decisions that matter most, and I will state my assumptions out loud so you can argue with them rather than inherit them. Put the American split on paper. Assume you ship 40 FEU a month from Shanghai to the United States, and today every one of those boxes lands on the West Coast. Assume you decide that 30% of that volume has to be served on the East Coast, for whatever distribution reason, so you are moving 12 FEU onto the East Coast road. The freight gap the print gives you is $9,568 minus $6,714, which is $2,854 per FEU. Twelve boxes at that gap is $34,248 more per month, about $410,976 a year.

That is a real number and it is the one the freight desk will quote you. But hold it next to the alternative, which is to keep all 40 boxes on the West Coast road and move the East Coast share inland by rail. In that case you swap a $2,854 ocean gap for a rail and drayage bill, and the only question that matters is which of the two is cheaper on a door to door basis. The ocean gap is the ocean half of the road. Do not price the whole road with half the map.

Now the European split. Assume you ship 60 TEU a month into Europe and you genuinely have a choice between a northern gateway and a Mediterranean gateway, with the same box and roughly the same final customer catchment. The lane gap the print gives you is $2,945 against $3,929, which is $984 per TEU. Remember a forty foot box is two TEU, so on the box you actually book that gap is $1,968. Across 60 TEU, routing all of it through the Mediterranean instead of the north is 60 times $984, which is $59,040 a month, about $708,480 a year, and that is before the inland leg on either side is priced.

Now the honest part: if the Mediterranean call lets you skip an inland leg that the northern gateway would charge you for, that inland leg may well be worth more than the $984 per TEU you saved, and the Mediterranean road wins anyway. The task is not to chase the cheaper headline. The task is to price both roads all the way to the same door and then choose. Assumptions made explicit: 40 FEU and 60 TEU a month, a 30% East Coast share, and equal final catchments. Change any of those and the totals change with them, which is exactly why you should run your own numbers and not mine.

Now, what to actually do with this week's read, and when. If your book out of Shanghai is still open for September, pull it apart by these five roads before you take a single quote. The US lanes are the ones that firmed, 3.5% and 3.0%, and a firm road does one thing reliably: it firms again before it eases, when capacity is being pulled toward it. So the US roads are the ones to cover early. If you have any meaningful US volume, get a fixed allotment or a contract slice in place for the coming month rather than riding spot, and treat a firming lane as a reason to lock rather than a reason to wait.

The European roads are the ones that eased, and a soft road is your negotiating room. If you ship into Europe or the Mediterranean, this is the week to go get two quotes instead of one, one through a northern gateway and one through a Mediterranean gateway, and price them to the same inland destination. The softening tells you the road is not full. It does not tell you it will stay that way, because capacity that leaves the Pacific can come back the moment the numbers flip, and a road that eased this period can firm next period simply because two carriers changed their minds about where to deploy.

The Gulf road is the one where I would stop quoting entirely off an old schedule. If any of your volume lands in the Gulf, build the transit promise on the assumption that the diversion is still there, not on the pre-diversion days you have in your system. Give the customer the longer date in writing, up front, rather than explain it after the fact. That lane rose 3.1% and it rose for a reason that has not changed, and an ETA built on a road that no longer exists is the most expensive mistake on this whole page, because it costs you the freight and the relationship.

Here is where I would be careful, because the obvious moves all have their own potholes. Switching your gateway, from West Coast to East Coast or from northern Europe to the Mediterranean, is the cleanest sounding move and the messiest in practice, because the two gateways rarely charge the same on the inland piece. Rail capacity, chassis availability, drayage rates and free time behave differently at each interchange, and a gateway that saves you money on the ocean leg can cost you more on the inland one. Price the whole road, both ends, before you switch.

Switching modes is the other tempting move, and it is the one people reach for when a lane firms. If a European road gets expensive enough, somebody always asks about the landbridge. But the landbridge is a road system of its own with its own nodes, its own border crossings and its own handoff points, and its own way of queueing when traffic is pushed onto it. So before you move anything, compare the two on the same basis: per box, door to door, with the transit days written down honestly on both sides. Do not compare a per TEU gate rate with a per FEU rail rate and call it a saving. That is the same unit trap in a new costume, and it has caught a lot of clever people.

The last pothole is the quietest one, and it is about the number you are reading right now. This print is a composite, it is Shanghai origin, and the per lane figures are spot snapshots for one period. Your contract rate on your own routing is a different animal entirely, and it may not move the way the index moved. So use this reading to decide where to push and where to protect, not as a substitute for the rate you actually hold. The headline informs the map. The map informs the decision. The index is not the decision.

One more thing about this page, and it is the piece I would tape to the wall. Every number here is a Shanghai origin number. It tells you what a box leaving Shanghai pays on each road. It says nothing about the return leg, nothing about a box leaving Ningbo or Qingdao or Busan or Ho Chi Minh, and nothing about your own negotiated position. If your supply base sits outside Shanghai, the direction of travel on these lanes is a useful signal but the levels are not your levels, and the gap between the signal and your invoice is exactly where plans go wrong. Read the arrows, then go get your own numbers.

Let me give you the counterfactual, because it tells you when to stop trusting this read. If the Middle East node reopens and the long diversions unwind, the Gulf road loses its detour toll and eases, and the Asia-Europe loop shortens and regains capacity, which would take the pressure off the capacity pull toward the Pacific. In that world the US lanes might still stay firm, but only if their firmness was demand and not diversion. That is the test I would apply: is a firm US lane firm because there is more cargo, or firm because the ships came over from the other side of the map? If it is the second, then a reopening on the Europe side will pull those ships home and the US road will ease as fast as it firmed. Watch the node, not the index, and you will know which kind of firm you are looking at.

So back to whether these roads can be walked. The American roads can be walked, and they are the ones that want covering now, because they are the ones being fed by capacity pulled from elsewhere. The European roads can be walked, and they are the ones that want negotiating now, because they are the ones losing that capacity and the ones where a soft number is an open door. The Gulf road can still be walked, but only if you walk it honestly, with the long diversion priced into the promise and not buried in a hope. Five roads out of one port, two directions, and none of them is the market. The market is a summary somebody writes at the end of the week. Your road is the one you have to move the box on, and that has always been, and will always be, a question of the route and not the rate.

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— By Ömer Kaya