News / Carriers in dire straits as spot rates continue in freefall right across ocean container trades

Tumbling spot container freight rates on all shipping routes from China caused the Shanghai Containerized Freight Index (SCFI) to shed 7% this week, sinking to another all-time low.

The SCFI has now fallen by 60% over the past year, reflecting increased weakness in every tradelane it covers.

The biggest percentage loss was on Asia to South America: a massive 25% drop in spot rates during the week, down to $472 per teu after a recent rally petered out.

Meanwhile, the two biggest tradelanes, Asia-Europe and the transpacific, also suffered significant declines in rates.

Asia-North Europe rates lost another 8.7% to slump to $211 per teu – the lowest ever recorded by the SCFI for the trade, and its ninth consecutive week of decline. Spot rates to Mediterranean destinations plunged 14% on the week to $203 per teu.

Anecdotal reports from China suggest that carriers this week have been touting rates as low as $100 per teu between Asia and North Europe, as vessel utilisation slid below 70% on some voyages.

It follows that the lines have been obliged to abandon all hope of obtaining planned general rate increases (GRIs) this month – but most seem to have decided to try again to boost rates by announcing new GRIs for 1 April.

However, this time, some carriers, including CMA CGM and MSC, appear to be more realistic with their proposals, asking for a more modest $500 per teu increase, instead of the $1,000 hikes of past GRIs.

This week saw the CKYHE alliance announce that it will halt one of its Asia-North Europe loops, and it is understood that the G6 alliance will permanently withdraw its Loop 6 service to North Europe, after its 11 week suspension ends in mid-May.

The toxic mix of weak demand and too much capacity saw even market leaders Maersk Line and CMA CGM lose money in the final quarter of 2015.

London-based container derivatives broker FIS said: “With rates on key east-west trades struggling, carrier financials could take another hammering in Q1 2016, and place them on the back foot for the remainder of the year.”

On the transpacific tradelanes, spot rates continued to erode in the middle of new annual contract negotiations, falling 8.4% to the US west coast, to $810 per 40ft, and 5.2% to the east coast, to $1,710 per 40 ft.

The pressure on the transpacific does not bode well for CMA CGM’s introduction of 18,000 teu ships to the route, a decision one analyst described this week as “madness”.

Oslo-headquartered Xeneta, a cloud-based container intelligence platform, said that notwithstanding the rock-bottom spot rates, contracts that were being renewed were being fixed at “significantly lower levels” than for the previous year.

Chief executive Patrik Berglund told The Loadstar today: “What is interesting is that the bigger volume shippers are pulling the prices down with their new contract demands and the carriers have to accept it, as the whole industry has this perception and are expecting the decline.”