News / Asia-N Europe rates level out, but can carriers maintain discipline?

Photo: Maersk

Hard capacity management by Asia-North Europe carriers, combined with the threat of huge FAK rate increases, appears to have staunched the container spot rate decline on the route.

Short-term rates are beginning to edge up, albeit from very low levels, after several consecutive weeks of 10% declines.

The proposed circa-$1,800 per 40ft FAK rate increases from 1 November, and the reduced service “winter schedule” announced by 2M alliance partners Maersk and MSC this week, are understood to have swayed the sentiment and could be the driver for a modest rate recovery on the tradelane.

However, it remains to be seen whether all alliance carriers will have the necessary discipline to desist from further rate discounting in the slack booking weeks to come.

Today’s reading of the Freightos Baltic Exchange (FBX) North Europe component shows a 3% uptick, for an average rate of $946 per 40ft.

And the Ningbo Containerized Freight Index (NCFI) market commentary said space for sailings to North Europe this week was “tight”, adding that rates had stopped falling and were “showing an upward trend”.

Nevertheless, this week The Loadstar received several unsolicited rate offers from China-based forwarders quoting rates from Shanghai to Rotterdam, Hamburg and Felixstowe down to $620 per 40ft, valid to 23 November.

But according to a UK-based NVOCC contact, these rates are unlikely to have been agreed with the carriers in advance.

“There are a lot of chancers out there gambling that once they have secured your booking the carrier will agree the rate, but eventually they will come unstuck and you could have a problem that the carrier will refuse the booking, and you end up paying a much higher rate,” he warned.

Meanwhile, backhaul rates from North European ports to Asia have become loss-leaders for carriers, with market rates no longer covering terminal handling charges.

However, it is the cheapest way for carriers to reposition their non-urgently required equipment back to China.

Additionally, subsidising export bookings has the benefit of taking surplus boxes out of storage at empty-container depots, thereby easing some of the cost pressure on lines.

Asia-Mediterranean rates were stable this week, with the FBX reading flat, at $1,480 per 40ft. And on the transpacific, the NCFI commentary said carriers had “slightly lowered” their rates this week, due to weak demand and a “sufficient supply of space”.

Indeed, this week’s Xeneta XSI Asia-US west coast average spot rate ticked down 2.5%, to $1,767 per 40ft, having lost around 20% in value since early September. And on the Atlantic side, Drewry’s WCI Asia-US east coast spot slipped 2%, to $2,630, which is 70% lower than for the same week of last year.

Transatlantic carriers saw another week of falling spot rates with, for example, the FBX coming close to dipping below the $1,000 watershed, as the average spot reading fell another 12%, to $1,035 per 40ft.

Short-term rates on the route have declined by around 80%, year on year, and are now roughly half of their historical levels.