More blanked voyages expected as carrier efforts to drive up rates falter
Container spot rates were largely unchanged for a third consecutive week, as it became evident ...
© Czanner
By Mike Wackett
Ocean carriers are burning cash at an alarming rate, with the second quarter expected to have been loss-making for several.
As container spot rates across the major tradelanes remain stubbornly below cost and contract rates collapse, carriers urgently need to remove capacity to improve the supply-demand balance.
Indeed, Xeneta reported this week that its contract rate index had declined almost 50% in the second quarter.
CEO Patrik Berglund said: “The fall from the peaks of last year has been almost as dramatic as the rates explosion which gave carriers such a profitable 2022.”
At first glance, Asia to North Europe container spot index components appear to have stabilised: for example, Xeneta’s XSI reading edging down just 1.3% this week, for an average of $1,224 per 40ft. However, anecdotal reports to The Loadstar in the past few days suggest the actual spot FAK rate for the route has dipped well below $1,000.
Moreover, some carriers have clearly given up on seeing a peak season demand boost and are prepared to honour sub-economic deals for the duration of the summer.
And in the one former bright spot for Asia-Europe carriers, Asia-Mediterranean spot rates are now coming under intense pressure, following the injection of extra capacity by lines seeking to capitalise on the relatively robust demand on the route.
Drewry’s WCI Asia-Mediterranean spot reading lost 2% this week, to $2,034 per 40ft, but with HMM extending its China-India Express standalone service to the Med in August, using 8,500-11,000 teu vessels redeployed from the transpacific, adding to the capacity upgrades by other carriers, rates will only be heading in one direction.
“I can see another rates bloodbath happening in the Med, like we are now seeing on the transatlantic,” a carrier contact told The Loadstar this week.
Meanwhile, on the transpacific the situation is equally bleak for carriers serving the Asia-North America tradelane. According to US-based consultant Jon Monroe, US warehouses remain full and hoped-for de-stocking that would prompt more purchase orders “is taking considerably longer than expected”.
He added: “We have a weakened demand in the US and consumer confidence is on the decline.”
The XSI Asia-US west coast spot reading was down 2.4% this week, to $1,216 per 40ft, while the Freightos Baltic Index (FBX) Asia-US east coast component slipped 4% to $2,207 per 40ft.
Nevertheless, these are average rates and Mr Monroe reported that carriers were touting $1,000 or below to BCOs for the west coast, with one major carrier said to have been offering a rate of $850 for a short period.
And on the transatlantic, while the spot rate indices hover around the $2,000 per 40ft level, the market is seeing huge discounting by alliance carriers, with offers down to $1,300 now quite common.
Comment on this article
Gina Hinde
June 30, 2023 at 1:46 pmWhat goes around comes around. During Covid these companies acted like pirates and increased their rates to £20,000 – £30,000 per container! Our organisation lobbied government and the companies themselves to keep the costs as they had always been around the £1200 – £1500 mark but they refused and made an obscene amount of money out of manufacturies and distributors across the world causing a huge increase in costs across the board. You cannot expect anyone to feel sorry for them now as they brought this on themselves. If they had left the prices as they were the current economic climate would be in a very different place.
Go Dowdo
June 30, 2023 at 2:10 pmI find it incredible, in fact almost unbelievable, that carrier CEOs are willing to squander the wealth their companies accumulated during the boom period of recent past. One would have thought they would have had the good sense of wanting to protect their gains and not revert to bad old habits of operating below cost to achieve acceptable load factors. Another race to the bottom is apparently in full swing.