Comment: another lacklustre month in container shipping

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Another rather lacklustre month draws to a close in the container market for September, in what has been a recurring theme this year.

With the prospect of Chinese Golden Week and the new International Maritime Organization 2020 sulphur cap looming large over the market, rates have been reluctant to rise.

Thrown into the mix, of course, are the same geopolitical issues that continue to dog the market on key tradelanes – ongoing tensions between the US and China, which have been leaving rates weaker on the transpacific lanes; and Brexit dominating the landscape in Europe, leaving many shippers concerned.

To manage these falling rates, void sailings have been employed on both transpacific and Asia-Europe tradelanes. These came into effect strongly this week, in line with the Golden Week holiday.

Some vessels that are being blanked along these routes are also expected to be taken offline for a short period, to either have their tanks cleaned ahead of the switchover to the IMO’s new low-sulphur fuel regulations, or to have scrubbers installed to try to make the most of high-sulphur fuel oil, especially now the differential between HSFO and LSFO is widening.

“There are still a lot of scrubbers to be installed – some may take Chinese Golden Week as an opportunity to do this as there is already a fleet of void sailings,” said a carrier source.

Rates fell over the course of the month on Platts North Asia to North Continent: from $1,300 per 40ft on September 2, to $1,000 per 40ft on September 24. And on North Asia to West Coast North America, from $1,550 per 40ft on September 2, to $1,250 per 40ft on September 24.

Some positive sentiment, however, remains for the coming months, with an early Chinese New Year, at the end of January, expected to boost spot loadings by the end of this month, as shippers try to front-load ahead of another lull in exports from North Asia.

North America market

Despite the void sailings from North Asia to US east coast and west coast, rates are still taking a downward turn following the strong GRIs posted at the start of the month, which didn’t stick for long.

“Carriers are managing their capacity through void sailings but it is telling in the market when rates fall despite so many void sailings promised,” said a market source.

“When there are a series of void sailings in the market, there is little patience from shippers to pay up as they know in a few weeks the rates will come back down, so they may as well wait,” said another source, predicting that rates would fall further in October despite some stronger GRIs heard once again in the market.

The spot freight market fell for North Asia to East Coast North America to $2,250 per 40ft on September 24 ,from $2,650 per 40ft on September 2.

North American Platts bunker charge

Prices for both high-sulphur fuel oil (HFSO) and marine gasoil (MGO) were very volatile in September, largely due to the volatility in crude following the attacks on a refinery in Saudi Arabia. HSFO continued to show a clear downward trend in the run-up to IMO 2020, whilst its discount to 0.5% marine fuels continued to widen in the spot market.

Platts bunker charge North Asia to east coast North America rose to $539.47 per 40ft on September 24, from $478.52 per 40ft on September 2, despite peaking at $590.99 per 40ft on September 17. And  from North Asia to west coast North America, it rose to $527.02 per 40ft on September 24, from $305.58 per 40ft on September 2, despite also peaking at $367.79 per 40ft on September 17.

UK and North Europe market

With uncertainty in the UK-EU Brexit negotiations, there have still been headaches in the Asia westbound tradelane, with low rates offering little respite for carriers. This comes despite the fairly strong utilisation rate, although this is being carefully managed through void sailings.

“Shippers are apparently annoyed this year with all the blank sailings, so are refusing to pay up front, which is why we are seeing high utilisation rates but flat actual rates,” a market source told S&P Global Platts.

Platts container rate on the North Asia to north continent route slipped significantly over the month as cargo enquiries started to dry up ahead of the Chinese Golden Week and carriers began to compete increasingly fiercely for the remaining cargo in the market.

In contrast, the North Asia to Mediterranean route only fell by $150 to $1,200 per 40ft, benefiting from relatively strong demand in comparison with tradelanes to the north continent.

North continent Platts bunker charge

As on the transpacific tradelanes, Platts bunker charge rates on headhaul routes from the Far East to Europe followed a similar upward trend on the back of a stronger oil complex during September.

Platts bunker charge on the North Asia-north continent tradelane rose, from $238.38 per 40ft on September 2, to $287.35 per 40ft on September 24, also peaking at $337.42 per 40ft on September 17.

The back-haul PBC2 north continent to North Asia route also rose, climbing $26.36 to $154.72 per 40ft on September 24, also peaking on September 17 at $181.69 per 40ft.

This a post is a monthly guest contribution by George Griffiths, editor, global container freight market, at S&P Platts