Desperate Asia-Europe carriers hope new GRIs will kickstart a happier new year

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CMA CGM has announced a general rate increase on all containers carried between Asian and North European ports of $950 per teu for December 1, and rival carrier Hapag-Lloyd said it would also seek an increase on the same date of $650 per teu.

No doubt these new GRI attempts will be imitated by other Asia-Europe carriers in a desperate last-ditch attempt to push freight rates back up on the beleaguered tradelane and convince investors they are on the right track going into 2016.

A sequence of failed GRIs was briefly broken at the beginning of November as rates jumped by almost $1,000 per teu – only to quickly fall back by a third of the increase as spot rates sank as carriers scratched around for cargo to fill their ships.

The second half of 2015 has been a disaster for carriers plying Asia-Europe. Third-quarter liftings plunged by 7%, compared with Q3 2014, to 3.8m teu, according to the latest data from Container Trades Statistics – a downturn that continued into October. And anecdotal reports suggest that there has only been a slight improvement in demand this month.

Moreover, just to throw the supply-demand balance further out of kilter, ocean carriers have engaged in a race to operate the world’s biggest containership on the route, contributing to an estimated 9% of extra cellular capacity to the mix.

A strategy of achieving the lowest unit cost – and thus higher profit margins – only works, of course, if the ultra-large vessels deployed are sufficiently utilised. Filling the decks with spot cargo at less than $300 per teu is not going to make for a profitable voyage, even for the carriers with the lowest unit costs – however impressive the related PR.

There was no doubt in the mind of Maersk Group chief executive Nils Andersen on Friday of where things had gone wrong for the flagship carrier in Q3, forcing it to announce staff and service cuts and putting ultra-large ship order options on the backburner: it was all about rates, he said.

Elsewhere, tomorrow is a critical day for Hapag-Lloyd, which will present its Q3 numbers just a few days after the shares from its IPO began trading on the Frankfurt stock exchange.

An updated trading statement in the IPO prospectus showed the carrier had achieved just €2m of net profit in July and August, after posting a respectable €157m profit in the first six months. Enough to make potential investors nervous.

Hapag-Lloyd and its advisors had postponed the IPO by a week and discounted the offer range to €20 from the original €29.

Today the shares remain at about €20, with anxious investors hoping to hear some positive news from Hapag-Lloyd’s chief executive Rolf Habben Jansen in tomorrow’s presentation.