Calm before the storm: shippers brace for hefty Asia-Europe rate hikes
Asia-North Europe shippers are bracing for a wave of FAK rate increases and peak season ...
The Asia to North Europe component of the Shanghai Containerised Freight Index (SCFI) recorded a 4.7% uplift in spot rates this week to $761 per teu, underpinned by a raft of cancelled October headhaul sailings by carriers.
Compared with the same week last year, container spot rates on the route are approximately 2% higher, but the profitability of the container lines is being severely dented by a year-on-year 43% hike in bunker costs, which they have been unable to recover from shippers.
Moreover, the demand outlook from Asia to North Europe for next month is described as “uncertain”, just as carriers prepare to reintroduce blanked sailings, suggesting that rates could come under renewed pressure in the coming weeks.
“Some slack in demand is anticipated before the stocking-up rush for the Chinese New Year kicks in,” said Alex Younevitch, managing editor, freight markets at S&P Global Platts.
Indeed, with the Chinese factory holiday commencing almost two weeks earlier next year, on 5 February, carriers will hope to hold rates steady until volumes pick up in January.
Nevertheless, rumours persist that Maersk Line and MSC will reactivate their suspended AE2/Swan loop in early December, which would add around 20,000 westbound slots to a depressed market place and drag down rates.
According to sources, MSC in particular has pushed for an earlier-than-anticipated resumption to the loop after the other two alliances decided not to cut any services, only to void October sailings, resulting in the 2M partners conceding market share.
However, in response to “the expected low demand”, the Ocean Alliance members announced this week they would cancel the sailing of the Cosco Shipping Himalayas, scheduled to depart from Ningbo on 17 November.
And on the backhaul, North European shippers should be scrambling to find space on ships next month, following the blanking – or in the case of the 2M, “temporary suspension” – of 11 westbound voyages this month.
Notwithstanding the significant reduction in capacity, China’s strict ban on paper and plastic waste has left a big hole in eastbound bookings this year, keeping rates some 50% lower than a year ago, at around $570 per 40ft.
Meanwhile, the SCFI recorded a 3.6% increase in spot rates from Asia to Mediterranean ports, to $778 per teu, which compares with the market rate of $640 a year ago.
The Ocean Alliance said it also expected reduced demand on this route later next month, and will blank an Asia to West Med loop advertised to sail from Qingdao on 19 November.
The saving grace for carriers in the third quarter has been the robust demand on the transpacific, which has seen spot rates from Asia to the US, as recorded by the SCFI, spike by a year-on-year 70% to $2,587 per 40ft for the west coast, and by 60% to US east coast ports to $3,294 per 40ft.
However analysts The Loadstar has spoken to expect the rush to beat the new 25% tariffs on a vast range of Chinese imports to the US from 1 January will see demand soften towards the end of the year, which could result in a significant rates crash.
Patrik Berglund, chief executive of benchmarking platform Xeneta, said the spot rate increases had “begun flowing through to contracted rates”, but that the increases for long-term contracts had been “less severe”.