Container shipping rates hit by overcapacity as slack season takes its toll
This week brought further evidence of the eroding container freight rate environment, as spot rates ...
A slide in east-west container spot rates this week is likely to force the hands of carriers hitherto reluctant to pull capacity until the slack season is fully underway.
Following a 5% increase in Asia to North Europe spot rates last week, the Shanghai Containerised Freight Index (SCFI) today recorded a 6.5% decline to $728 per teu.
One shipper told The Loadstar this week he had received unofficial notification from his primary carrier that it would not be implementing the previously announced mid-November FAK hike.
Rates for Mediterranean ports, as recorded by the SCFI, also declined, dipping 6.2% to $619 per teu.
One carrier The Loadstar spoke to this week said it was “difficult to explain the rate weakness, as our ships are running over 90% full from Asia”.
He suggested that in order to stabilise the rate situation before the annual contract discussions get underway, “a shock might be needed” – in the form of more extensive voyage blanking programmes.
It would seem that with the Chinese New Year holidays falling just six weeks into 2018, some container lines were hoping that the slack season would be short-lived.
So far, carriers have been slow to confirm their intentions regarding blanked Asia-Europe sailings this month and next, and the market appears to have taken this as a signal that during the weaker demand period there will be significant excess capacity, thus rates are likely to drop to win cargo.
Commenting on its recently launched carrier and shipper-sourced freight rate data for the trade, which also showed pricing erosion this week, S&P Global Platts container freight markets senior editor Andrew Scorer told The Loadstar today that November was turning out to be a “tug of war” between carriers and BCOs as the annual contract negotiations beckoned.
Meanwhile, Drewry’s World Container Index (WCI) for Asia-North Europe also tracked down this week with the consultant predicting that rates “are expected to head south next week” as carriers cancel mid-November increases. Drewry noted that spot rates on the route were currently around 20% lower than a year ago.
For the transpacific trade, there was further worrying data for carriers to mull from this week’s SCFI. An impressive 10.7% and 18.2% increase for the US west and east coast ports a fortnight ago was badly dented by the SCFI reading this week.
For Asia to the US west coast there was an 8.9% fall to $1,411 per 40ft, while for the east coast, spot rates were down by 8.2% to $1,917 per 40ft.
During its third-quarter earnings call this week, Maersk said an average 20% decline in east-west spot rates since the beginning of October, coupled with a sharp increase in bunker costs, meant it was necessary to downgrade its full-year forecast for the carrier.