News / Carriers sailing in red ink, with 'another rates bloodbath' heating up

© Czanner

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.