Container spot rates up out of Asia, but backhaul rates falling at last
Container spot rates between Asia and Europe and Asia and the US surged this week ...
What goes down often stays down and this appears to be the stark reality for beleaguered Asia-Europe container lines after another dismal week of plummeting spot rates with little to suggest a recovery anytime soon.
The all-important Shanghai Containerized Freight Index (SCFI) shed another $102 per teu from Asia to North Europe this week with the index for Mediterranean destinations declining by a further $115 per teu.
It leaves the SCFI at $342 per teu for North European ports and $466 per teu for the Mediterranean – representing an all-time low for North Europe.
Moreover, sources report some carriers are offering rates as low as $275-300 per teu to North Europe and that the planned 1 June general rate increases (GRI) of $800-1,000 per teu have been “laughed out of the door” by shippers.
Current rates appear to be sub-economic, even for 18,000 teu-plus ultra large container vessels (ULCVs), and after a general good first quarter many carriers will now be trading in the red and may feel powerless to turnaround the situation by the end of the half-year reporting period.
For example Hapag-Lloyd reported an average rate per teu in Q1 of $1,086 for its Asia – Europe business, but that will no doubt fall substantially in the second three months reflecting the intensity of the rate war.
According to the UK-based container broker FIS the average year-to-date rate on the Asia – North Europe trade has plunged to just $724 per teu, compared to $1,292 per teu during the same period of 2014, representing a painful 44% decline.
Clearly the current freight rate levels are unsustainable for Asia – Europe carriers who must all be urgently rethinking their strategies.
This even applies to Maersk Line, who although benefitting from deeper pockets than many of its competitors has a duty to shareholders and investors to act responsibly in its quest to regain “lost” market share.
It is perhaps indicative of what the world’s two largest carriers, which together form the 2M alliance, are planning strategy-wise that they remain the only significant part of the market not to have announced blanked sailings for June in support of the GRIs.
In week 24, commencing 8 June, the CKYHE alliance will skip its NE2 and NE8 services, while the following week, commencing 15 June will see the G6 alliance skip Loop 7 and the O3 partners blank the EUR2 service.
In week 26, commencing 22 June, CKYHE will again skip the NE2 service, the O3 will blank the EUR3 service and the G6 has cancelled its Loop 6 sailing.
Elsewhere, SCFI spot rates for Asia to the US west and east coasts improved by $114 per 40ft and $75 per 40ft to reach $1,526 and $3,216 per 40ft respectively, although FIS noted that the rates remain 18% lower than in the corresponding period of 2014.
The increases are in fact a disappointing reaction to the Transpacific Stabilisation Agreement’s (TSA) recommendation to member carriers of a $600 per 40ft increase effective 1 June, however carriers plying these tradelanes are not yet suffering from the rate crisis that is seriously impacting the profitability of Asia-Europe routes.