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There was little Christmas cheer for Asia-Europe ocean carriers today as the Shanghai Containerised Freight Index (SCFI) declined on both North Europe and the Mediterranean legs, leaving container lines in a precarious position going into the new year.

After a brief recovery last week, when SCFI spot rates for North Europe registered a gain of $428, this week saw a $145 drop to $558 per teu, a figure that is around half of the average freight rates over the year when they enjoyed the benefit of much higher-paying contract cargo.

But contract negotiations this year have been hijacked by the increasing influence of spot cargo, to which carriers have been forced to resort to a much greater extent this yeart in order to fill their ships.

As a consequence, shippers not prepared to agree contract rates at double what is available in the spot market, while carriers are reluctant to commit to anything other than short-term agreements to carry containers at what they regard as sub-economic rates.

Thus a classic Catch-22 situation has developed on the Asia-Europe liner trades. Carriers are pinning their hopes on a dramatic pick-up in trade and a reduction in capacity in order to force spot rates back via new general rate increases (GRIs).

The theory is that once they have achieved this, they will be in a position to begin contract rate negotiations with shippers from a position of greater strength.

There is perhaps an increasing sense of the unhinged about both the quantum and the timing of carrier GRIs in recent times. For example, the next raft of Asia-North Europe GRIs is scheduled for January 1, with most carriers asking for an increase of around $1,000 per teu – although MSC is actually trying to get customers to pay another $1,500.

But with no immediate sign of an upturn in trade, and an estimated 1.3m teu of new capacity due to swell the world’s already obese fleet next year, the fundamentals remain weak and the prospect of carriers getting even moderate increases seems remote.

It is also difficult to visualise how the current merger and acquisition activity in the industry will improve conditions, given that the joining of the two Chinese state-owned lines and the acquisition of APL by CMA CGM would still leave the same number of vessels plying the trade, which would do little for the overcapacity glut.

The only ray of hope is that the carrier consolidation would result in two fewer players in the volatile market place, and thus marginally less competition.

London container derivatives broker FIS agrees that 2016 is not looking good for carriers and accuses the container lines of “invoking Einstein’s definition of insanity”: doing the same thing repeatedly and expecting a different result.

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