4/11/2015

Carriers on the Asia-Europe trade have finally been rewarded as freight rates surged last week ahead of their planned November general rate increases ranging from $750 to $1,200 per teu. However, one analyst indicated the surge may be short-lived, caused by a resumption of factory production following China’s national holidays and a rush to ship out cargo before any GRI implementation.

The latest Shanghai Containerised Freight Index shows that freight rates on the Asia-north Europe and Asia-Mediterranean trades recorded their highest ever weekly rises, both in percentage and monetary terms, as reports of improved utilisation levels toward the end of October proved correct and carriers managed to push through the extraordinary price hike.

On the Asia-north European trade spot market rates were up by whopping $757, or 327.7%, to $988 per teu, while on routes to the Mediterranean from Asia they climbed some $602, or 298%, to $804 per teu, representing the highest level witnessed on the SCFI since the end of July for either trade.

Whether lines can sustain rates at this level, however, is another matter.
Earlier last week, Alphaliner noted how carriers had already started to remove excess capacity in line with the winter slack season and the traditional slowdown in demand.

On the Asia-north Europe trade, carriers have effectively withdrawn three and a half strings to north Europe since the start of September, which is the equivalent of 35,000 teu per week or roughly 12% of total fleet capacity.

However, Alphaliner warned that these capacity cuts are still insufficient to address the supply and demand imbalance in the market, and as such it expects freight rates to remain weak over for the rest of 2015.

Moreover, the analysts also doubted the longevity of the current level of demand, as it is thought that this sudden increase in traffic can be attributed to the resumption of factory production in China following its national holidays and a rush to ship out cargo before any GRI implementation.

On the transpacific trade last week, member lines of the Transpacific Stabilization Agreement also managed to push through their respective GRIs to the US east coast and US west coast from Asia, however only partially.

With capacity utilisation on transpacific services at its lowest levels since March and reports of a drop in demand toward the end of the peak season, which would coincide with the news last week of a sharp drop in the growth of the US economy in the third quarter, carriers could only muster average price increases to the west and east coast of the US of 16.9% and 8.8%, respectively.

Following these increases, freight rates on the Asia-US west coast trade currently stand at $1,363 per feu, while those to the Atlantic seaboard sit at $2,354 per feu, according to the latest SCFI.

Drewry’s Hong Kong-Los Angeles benchmark dropped 8% last week to $1,218 per feu, but is expected to climb over the next week to reflect the partial realisation of GRIs.

Similar to the situation on the Asia-Europe trade, for transpacific carriers the question will be whether capacity cuts will be sufficient to ensure rate stability in the weeks ahead.

With the surge in rates on the Asia-Europe trade and gains on transpacific services, as well as a rise in rates to the Middle East and Oceania from Asia, the SCFI Comprehensive Index rose by 41.1% to 759 points to its highest level since the final week of July

Keeping you updated,

Michael Tisch

Back to News Page