Asia-Europe ocean spot split nears record level

The pricing gap between Asia-North Europe and Asia-Mediterranean container services has widened to near-record levels, as disruption linked to the Strait of Hormuz continues to distort freight markets.

According to analysis by Sea-Intelligence of Drewry’s World Container Index (WCI) spot rate data since 2012, the arbitrage spread was “rapidly approaching a situation we have not seen before”.Â

The spread between Asia-North Europe and Asia-Mediterranean spot rates is typically negative because freight rates into the Med are usually higher, despite the shorter sailing distance.Â

Sea-Intelligence explained that this reflected vessel deployment patterns, with larger ships typically serving North Europe, resulting in lower unit costs than services into the south.Â

However, the consultancy said the relationship had changed markedly since the pandemic, with the spread becoming both wider and significantly more volatile.Â

According to the latest WCI data, the differential has now reached -$1,678 per 40ft, a split exceeded only during an eight-week period at the height of the post-pandemic supply chain disruption in 2022.Â

“The relative imbalance between Mediterranean and North Europe is therefore almost at a historical record high,” Sea-Intelligence said.Â

“A key element influencing this development is the crisis in the Strait of Hormuz, which has prompted some cargo to detour via the Mediterranean and down into the Red Sea from the north. This de-facto increases the demand pressure on the Mediterranean services,” it added. Â

By contrast, Sea-Intelligence found that the pricing spread between Asia and the US east and west coasts, while increasing, remained “unremarkable” in the context of the past 14 years.Â

“This lends further credence to the notion that the Europe spread is driven by a spillover effect from the Hormuz crisis, as this effect would not impact the spread in the transpacific.”Â

The analyst also compared Asia-North Europe with Asia-US west coast spot rates, finding that the gap, relatively stable before the pandemic, had become “much more volatile” – even “erratic”.Â

When the spread turns negative, it indicates higher rates on the transpacific than on Asia-Europe.Â

Sea-Intelligence noted that a similar spike occurred in June last year, after the sudden removal of tariffs of more than 100% on China-US trade triggered a short-lived surge in demand.Â

“We are now seeing a new sharp spike. Not quite to 2025 levels yet, but resembling it. This is potentially an indication of history repeating itself, with a sharp spike in the transpacific driving the arbitrage premium to a very high level, but this would likely also be normalised soon as also seen in 2025.” Â

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