Asia-Europe carriers prepare for battle over market share with FAK rate cuts
Asia-Europe ocean carriers are preparing for a market share battle by lowering their FAK rates ...
Container spot rates from Asia fell sharply this week as the full impact of China’s annual new year factory closures was felt.
This should come as no surprise, however, given the reduced load factors following the holiday, said one analyst today.
The Shanghai Containerized Freight Index (SCFI) saw all its components fall this week, its combined index plunging almost 10% to 772.45.
Spot rates to north Europe declined by 9.7%, to $827 per teu, and rates to Mediterranean ports dropped by 9.5%, to $721 per teu, as the planned FAK 1 March rate increases were binned by carriers in favour of trying to hold onto existing prices.
Transpacific carriers saw spot rates plunge, the SCFI recording an 11.3% decline from Asia to the US west coast, to $1,252 per 40ft, and to US east coast ports slumping 12.3% to $2,375 per 40ft.
“This week, the factory closure effect has genuinely kicked in, but this should not be surprising,” Neil Dekker, consultant at ClipperMaritime, London, told The Loadstar today.
“Industry load factors to Europe will drop to well below 90%, which has triggered a 10% decline in the rate to north Europe. The impact on the transpacific trade has been felt even more.
“Spot rates are between 15% and 20% lower than 12 months ago and this is not the position ocean carriers would like to be as they enter early discussions for annual contracts with BCOs.”
And carriers will need to build into new contract rates compensation for the increase in fuel costs and the probability of another spike in the price of oil later in the year. In fact, Maersk Line revealed that its negotiators’ “success” in achieving a $106 per FFE average rate increase last year had been tempered by a $93 per FFE fuel cost hike.
Andrew Scorer, senior container pricing specialist at S&P Global Platts, told The Loadstar there were concerns that rates from Asia could fall further, quoting a logistics source suggesting spot rates were “heading down to December levels”.
Mr Dekker said his feedback suggested carrier discipline on the transpacific had “faltered a little this week”, with some smaller lines offering rates “well below $1,250” per 40ft to the US west coast.
But, he added: “On a positive note, spot freight rates in the Asia to Europe and transpacific headhauls have been surprisingly stable this year with relatively little erosion since 1 January.”
Meanwhile, European exporters to Asia and the Middle East are becoming increasingly concerned about the knock-on effect of the number of blanked headhaul sailings around the CNY period, which will result in cancelled eastbound voyages in April.
One contact told The Loadstar he feared that European exporters “are going to have a problem worse than last year”.
“I’ve never seen that many cancelled schedules,” he added, noting that there were normally seven sailing a week between Singapore and Jebel Ali, but there are none scheduled between March 3 and March 11.
Following last year’s CNY, carriers cancelled a significant number of backhaul sailings, resulting in a substantial backlog of containers to be shipped, causing severe supply chain delays and a big spike in rates. Although prices eventually fell back, carriers successfully held onto many of their gains, with rates still some 15% higher than a year ago.
However, a significant factor in the disruption last year was the restructuring of the alliances from April, and one carrier told The Loadstar recently he did not expect “anywhere near the same level of problems this year”.