News / An eerie lull in spot market as rates game gets critical for ocean carriers

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There was an eerie lull in the container spot market this week as the Shanghai Containerized Freight Index (SCFI) recorded only minor adjustments in freight rates across the main tradelanes.

The Asia-Europe components of the SCFI recorded spot rates for North Europe at $695 per teu, while for Mediterranean ports the rate was $553 per teu.

On the transpacific, Asia-US west coast spot rates stood at $1,153 per 40ft, and for the US east coast at $1,684 per 40ft.

However, Asia-Europe ocean carriers are entering a crucial week.

They are banking on 1 September GRIs and FAK increases to propel the SCFI higher after three consecutive weeks of losses eroded the 1 August rate increases – despite the industry being in the midst of the peak season.

However, anecdotal reports suggest that forward spot rates for Asia-North Europe for September are already under pressure.

One source told The Loadstar that some prepaid rates being quoted by carriers were down to $700 per 40ft high-cube, and that in his view it was “only a matter of time” before they slumped to $400-$500.

Notwithstanding the prospects for September, China’s Golden Week holidays from 2-7 October will result in a softer demand during and immediately after this period.

The G6 grouping of carriers is the first alliance to react to the reduced demand expectations, voiding two Asia-North Europe, two transpacific and one Asia-Mediterranean sailings during and around the holiday period.

And in order to avoid further rate war carnage, the three other mega-alliances will need to promptly follow suit and cancel voyages.

Indeed, it has proved in the past that the forward announcement of blanked sailings also has some positive impact on current rate levels, as the level of concern of shippers is raised regarding space allocation.

It goes without saying that after $2.5bn of net losses reported so far for the first half of 2016, the container lines desperately need to stabilise the rate situation in the four remaining months of the year.

According to Lars Jensen, partner at SeaIntelligence Consulting, the top twenty carriers could already have lost around $4bn in H1.

“Results have markedly worsened from Q1 to Q2 2016, hence, if the market conditions do not change materially, the industry might be facing combined losses of as much as $8-$10bn for the full year,” he warned.