Containers
© Christian Lagereek

Container spot rates on the headhaul westbound Asia-Europe trades this week again reversed general rate increase-led gains, with the Shanghai Containerised Freight Index’s (SCFI) North Europe component dropping 13.6%.

The previous week’s gains on each route, of 170% and 143% respectively, were due to the 1 May GRIs.

The Shanghai-North Europe leg fell $96 to $636 per teu, while the Mediterranean route declined 7.5% to $873 per teu.

Asia-US west and east coast legs appeared more stable, with the former recording a marginal $6 increase to $863 per feu and the latter an $11 decline to $1,683 per feu.

Carriers have already begun announcing mid-May GRIs on Asia-Europe in an effort to stem further declines and prevent a rapid return of the volatility on the trade.

OOCL said yesterday it would increase rates to all European and Black Sea destination from Asia by $280 per teu. That followed announcements from CMA CGM and MSC, looking to implement increases of $200 and $250.

Richard Ward, of container derivatives broker Freight Investor Services, said: “If successful, the latest attempts will likely reverse the declines seen this week, helping to somewhat stabilise the monthly average.”

As container lines’ first-quarter results have begun to appear, there has been considerable discrepancy over predictions on where the market is heading.

Japanese carrier K Line has forecast that Asia-Europe rates could increase by 23% year-on-year over the course of this financial year, “which seems somewhat unrealistic given rate developments year to date”, commented Mr Ward.

He added: “In fact, the Xeneta platform is indicating that long-term contracts of three months or greater on the key Asia-Europe trade have fallen significantly. Currently, the average market rate on the trade is 46% lower than the same time last year, while those that can achieve rates towards the lower end of the market have seen their costs fall by 64%.

“Even with longer-dated contracts expected to increase in the third quarter by around 10%, they will remain roughly 30% lower than those in 2015.”

A likely fillip to many carriers, however, is better utilisation rates. For example, Loadstar sources suggest “2M Asia-North Europe ships appear to be ‘full’, as suggested in Maersk’s presentation”, although there have been suggestions that this could be due to shippers and forwarders steering clear of lines clearly in financial trouble.

The current focus is resting on the two South Korean lines, Hanjin Shipping and Hyundai Merchant Marine (HMM), which have both entered into restructuring programmes with their major creditors, and are attempting to negotiate lower charter rates with shipowners.

Danao has confirmed that HMM is seeking a 30% reduction in its daily hire rates, but the shipowner said it had yet to receive an approach from Hanjin.

Meanwhile, APL-owner NOL today reported a first-quarter 2016 net loss of $105m, while producing a core EBITDA of $18m.

NOL president and chief executive Ng Yat Chung said: “Worsening overcapacity of shipping tonnage in 2015 hit the industry well into first quarter 2016. Freight rates which declined across major tradelanes to historic low are expected to remain weak in the face of slower demand growth.”

APL’s first-quarter year-on-year volume fell 6%, it said, mainly due to weak backhaul liftings, while average freight rates fell 23% during the same period. As a result, its first-quarter revenue fell 29% year-on-year to $1.14bn.

However, it added that its headhaul utilisation rate remained at 90%.

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