News / CMA CGM moves its mega-ships to the transpacific as Asia-Europe rates keep tumbling

04/03/2016

CMA CGM has confirmed that from the end of May it will redeploy its flagship fleet of 18,000 teu ships on the “most active and dynamic market to date: the transpacific”.

It will source the ships from the sickly Asia-North Europe tradelane.

Following recent successful trials at the Californian ports of Long Beach and Oakland by the 17,859 teu CMA CGM Benjamin Franklin, it will be joined on the Pearl River Express service by five similar-size ships from its FAL 1 Asia-North Europe loop.

It is assumed that the six 11,000 teu-type ships, currently operating on the PRE service, will switch to the FAL 1 loop.

The decision is further evidence of how dire the Asia-North Europe route has become, with spot rates having plunged by around 70% since the beginning of the year. And, with anecdotal reports suggesting that some headhaul voyages have been sailing with load factors of just 60%, there seems nothing to prevent freight rates falling even further.

Indeed, container spot rates between Asia and North Europe declined another 10% this week, according to today’s Shanghai Containerised Freight Index (SCFI), down to only $231 per teu – a tad higher than the lowest ever recorded by the SCFI.

However, according to London-based container derivatives broker FIS, the container lines are at last becoming “reluctant to keep discounting rates, given how low they currently stand”.

But, said FIS, the one exception is Maersk Line, reportedly “being a lot more aggressive” and publishing rates at under $200 per teu.

Elsewhere, spot rates to Mediterranean destinations also suffered, losing $121 to $236 per teu.

Unless there is a dramatic improvement in demand, carriers would appear to have very little chance of implementing the mid-March general rate increases for North Europe and the Mediterranean, which have already been deferred from the beginning of the month.

Meanwhile, CMA CGM’s decision to deploy its biggest ships to the transpacific route – in line with its growth strategy and for the “optimisation of its fleet” – is unlikely to assist spot rates on that tradelane.

These have also come under pressure recently, just as new annual contracts are being negotiated. According to the SCFI, spot rates to the USWC declined by 12% last week to $884 per 40ft, and also fell by 9% to the USEC to $1,804 per 40ft.

None of CMA CGM’s peers have announced similar plans to deploy their biggest ships onto the transpacific, but if the French carrier gains market share, then the biggest carriers are certain to follow suit.

This would put the US west coast ports under severe pressure, given that they and their infrastructure have still to fully recover from the introduction of 10,000 teu ships to the trade over the past two years.

At ICHCA’s Bigger Ships: Greater Challenges conference in Barcelona this week, speakers questioned the benefits of mega-ships on major tradelanes and the resulting impact on smaller trades from cascading.