News / Capacity control keeps ocean freight rates steady, but container rollovers increase

© Vladimir Serebryanskiy

Ocean carriers are successfully underpinning freight rates through capacity discipline, with reports of container rollovers at Chinese export hubs and detention transhipment ports.

Flexport head of ocean freight (EMEA) Martin Holst-Mikkelsen told The Loadstar: “There is a high utilisation, and services on the [Asia-Europe] trade are relatively full for the coming two weeks.

“We are also seeing some increase in container rollovers at ports in China as well as at transhipment hubs,” he added.

Indeed, notwithstanding the slump in bookings, carriers have managed so far to keep a lid on the normal rate erosion consequences of persistent soft demand, protecting rates by withdrawing 34 – 26% – of the scheduled 130 headhaul sailings this month, according to eeSea data.

Moreover, with a few exceptions, carriers appear to have no appetite for a rates war that could plunge some lines into bankruptcy.

The North Europe component of Friday’s Shanghai Containerized Freight Index (SCFI) recorded a slight, 0.7%, uptick in its spot rate to $744 per teu, while the rate for Mediterranean ports edged up 1.5%, to $853 per teu.

And there are some optimistic signs of a recovery in the trade, with an increase in demand for bookings a few weeks out, “likely attributed to positive news surrounding Covid-19 and the gradual reopening of economies in Europe”, said Mr Holst-Mikkelsen.

Meanwhile, on the transpacific tradelane, carriers have been equally judicious with their capacity management, removing 19% of headhaul capacity in May by blanking 49 of the advertised 252 sailings so far, according to eeSea data.

Spot rates from Asia to the US west coast, as recorded by the SCFI, were up 0.3% on the week, to $1,730 per 40ft, although for east coast ports there was a 2% decline, to $2,717 per 40ft.

According to Hapag-Lloyd’s chief executive Rolf Habben Jansen, the carrier has concluded the majority of annual contracts on the tradelane, which he said were overall “satisfactory”.

Although this week there was a slight fall in long-term contract rates, as recorded by the China Containerized Freight Index (CCFI), the overall comprehensive reading is some 9% higher year on year, providing some further positive news for carriers.

There are, nonetheless, some very strong headwinds for container lines to overcome as a consequence of the coronavirus pandemic, but Bimco’s chief shipping analyst, Peter Sand, does not agree with suggestions that there will be major changes in trade post-Covid-19.

“Rolling back globalisation is not the answer to this crisis, or any crisis for that matter,” he said during a Xeneta Transportation Insights webinar last week.

Every nation “tended to look inwards when a crisis happens, and protectionism is bound to show its ugly face once again”, he said. But he argued that any trend towards mass near-sourcing would result in “fewer goods, lower quality and higher prices”.

And all will not necessarily be rosy for ocean carriers post-crisis, according to Mr Sand, with container shipping remaining a “cost-cutting game” and a “marginal profit business”.