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Hapag-Lloyd

The Shanghai Containerized Freight Index (SCFI), which was published one day early this week in view of a public holiday in China today, shows little sign of any traction for container spot rates from Asia to Europe.

Ocean carriers are hoping for the traditional pre-peak season boost for rates from Asia to North Europe and the Mediterranean but as every week goes by the outlook is more uncertain.

Speaking during the Hapag-Lloyd Q1 earnings call presentation in early May, chief executive Rolf Habben Jansen said that it was “a bit of a crystal ball you have to look into” as to when the rate recovery starts to bite but reckoned that it would happen “between now and four-to-six weeks” time.

 

However, Mr Habben Jansen also cautioned that the rate lift could come as late as last year when the first spike was recorded from 1 July.

Notwithstanding the sluggish recovery for Asia-Europe rates, carriers that The Loadstar spoke to at Transport Logistic in Munich this week were generally optimistic that they would benefit from a good peak season this year based on volume outlook requirements that they getting from their major customers.

Meanwhile, the European components of this week’s SCFI were flat at $779 per teu for North Europe and $745 per teu for Mediterranean ports, which is respectively 10.5% and 17.5% below the level of the same week of 2018.

Elsewhere, on the transpacific tradelane on 1 June the US began collecting the 15% extra duty on $200bn-worth of Chinese imports, prompting China to retaliate with higher tariffs on $60bn of US goods.

There appears to be little immediate prospect of the two nations calling a truce on their tit-for-tat trade war – indeed the US is ramping up its threats to include more Chinese goods within the tariff structure, and it remains to be seen when the negative impact on trade will be felt in carrier liftings.

Container spot rates, as recorded by the SCFI, showed only a slight reaction to the watershed hike of tariffs from 10% to 25%, with rates from Asia to the US west coast edging down by a modest 2.2% to $1,439 per 40 ft, while US east coast rates fell by 1.5% to $2,502 per 40 ft.

By comparison to the same week of 2018 both west and east coast spot rates remain some 6% above those levels.

After an unsatisfactory first quarter that, according to analyst John McCown at New York-based Blue Apple Capital, has saddled the liner industry with cumulatively some $730m of red ink on their balance sheets, carriers must quickly turn their businesses around to avoid the prospect of a disastrous full year.

It also follows that it is more essential than ever that the liners hold firm on recovering from shippers the additional costs resulting from IMO 2020, some of which will emerge in the fourth quarter as tank cleaning and the replenishing with the more expensive maximum 0.5% sulphur content bunkers begins.

However, according to George Griffiths, editor, Global Container Freight Market at S&P Global Platts, there are now “serious concerns in the market” as to the longer-term availability of HFO (higher 3.5% sulphur fuel) which carriers fitting their ships out with exhaust gas cleaning scrubber systems need to continue to consume in order to recover the cost of the installation of the onboard refineries.

Mr Griffiths said that carriers that have scrubbers fitted on their vessels will be obliged to purchase low-sulphur fuel when there are no viable options to bunker with HFO, thus making their scrubber ‘investment’ counterproductive.

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