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BIMCO is the latest container shipping industry association to paint a gloomy picture of low demand on normally high-volume trades, being exacerbated by a record influx of newbuild tonnage.

“As volumes drop and new ships are introduced on a weekly basis, it is even more difficult to strike the balance that will see freight rate improvements,” said BIMCO, citing the lack of European demand as a particular “concern”.

Looking beyond the Shanghai Containerized Freight Index (SCFI), which records average spot rates only from Shanghai to North Europe, BIMCO analysed the China Containerized Freight Index (CCFI) to gleam a “fuller picture of how container rates are faring out of China”.

The CCFI, also produced by the Shanghai Shipping Exchange, collects data from 10 major Chinese ports and includes long-term contract rates in addition to spot rates, thus providing a more balanced barometer of the health of a tradelane.

In an analysis of the CCFI over the past two years, BIMCO suggests a bleak picture.

For example, looking at European component of the CCFI, the index value at January 2015 was just under $1,100 per teu, but by September this had plummeted to around $800. This adds to the difficulty for carriers in the forthcoming round of contract negotiations with shippers.

Meanwhile, on Friday the SCFI for North Europe hit a 15-week low of $259 per teu – barely enough to cover the fuel cost on the voyage, let alone other vessel operating costs.

However, ocean carriers are notoriously reluctant to discuss the ratio of spot to contract cargo they carry, traditionally regarding the former as a top-up ‘necessary evil’ when contract demand is soft.

Even in the most detailed and transparent of carriers’ financial reports, the amount of ‘non-contract’ cargo carried is a closely guarded secret confined to the boardroom.

However, what we do know from anecdotal reports is that the percentage of spot cargo this year appears to have increased significantly as volumes declined and bigger ships have been deployed.

No container line wants to see its latest ultra-large containership arriving at its first European port of call with its deck half empty.

Elsewhere, Maersk Group chief executive Nils Andersen has said that if the group’s container arm was suffering then its rivals would “suffer more”, but in an article in today’s Wall Street Journal the line’s CEO calls for more consolidation to rescue the liner industry.

Soren Skou told the WSJ  that demand growth in 2015 has been “extremely weak, at around 1.5% to 2%, much less than anticipated, while capacity will grow at around 7%”.

Mr Skou even suggested that some of Maersk Line’s ship investment decisions may have been flawed, given the benefit of hindsight.

He said: “Global growth is very disappointing, and if we knew what we know today, maybe some of the decisions we made three years ago would have been different.”

If the best-in-class and highly profitable Maersk Line is becoming twitchy about the supply-demand imbalance, then its peers must be much more nervous.

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  • Ed Evans

    October 13, 2015 at 12:58 pm

    The SCFI does more than record the spot prices from China to Europe – it is a global measure greatly disliked by those wishing to drive up the spot price for container shipments from Asia.
    The CCFI has its own issues, but is in less disfavor with the lines, due largely to its use of contract rates as well. Both the CCFI and SCFI are useful to shippers, giving firms such as mine a negotiating position of greater strength than otherwise. The indices should provide shipping lines with visibility that is not legally available through discussions with competitors.
    Can you spell anti-trust?

    • Mike Wackett

      October 14, 2015 at 7:16 am

      Hi Ed,
      The story should have been clearer in the use of ‘only’ for the SCFI which in this instance referred to only one Chinese gateway port and the exclusion of contract rates from the index.
      In addition to the two European and US tradelanes the SCFI records average spot rates across 11 other routes from Shanghai.
      Alphaliner reported yesterday that spot rates to the Med have fallen below $100 per teu and to $50 per teu for South America – which cannot be a healthy situation for carriers or shippers in the long-term.

      • Ed Evans

        October 14, 2015 at 12:11 pm

        I agree that the prices are unsustainable. Conspiracy is not the way to fix the problem, though. It takes the lines’ refusal to lose money on spot freight for any pricing increase to be effective. Vessel delays and cancellations could help some, but if there is ‘leakage’ among carriers who just want vessel utilization to go up, the prices will stay down. Conspiracy will lead to greater losses in the end, see current air freight and ro-ro price-fixing issues.

    • Richard Ward

      October 14, 2015 at 3:52 pm

      Insightful comments Ed and I totally agree. Carriers have had over 5 years to deal with the greater transparency that such indices provide to shippers, however I wonder how many of them have embraced new tools to meet the changing environment?