The 'Fortnight Brace' governs today's ocean spot market
Reaching peak?
Container spot freight rates on the Asia-Europe and transpacific trades experienced another week of persistent declines, as pre-Chinese New Year demand continues to weaken.
However, the declines seen this week were flatter than the week before, indicating that carriers have begun to withdraw capacity as late January/early February volumes fail to live up to expectation.
This week’s World Container Index (WCI) from Drewry saw the Shanghai-Rotterdam leg drop 5% week on week, to end at $2,379 per 40ft, while the Shanghai-Genoa leg declined 6% from the previous week, to finish at $3,293 per 40ft.
“Back in December, Xeneta data clearly indicated that carriers were going to ramp-up offered capacity in January to capitalise on traditionally stronger demand at the start of the year,” said Xeneta head analyst Peter Sand.
Source: Xeneta
“That is exactly what has happened on the main trades out of the Far East, but capacity is outweighing demand with the inevitable downward impact on freight rates,” he added, noting that the average Asia-North Europe spot rate was down 5% compared with the beginning of January, and down 11% to the Mediterranean.
However, the busy January has been something of a boon for carriers – The Loadstar understands that long-term contract rates agreed during the month were higher than some customers had hoped for, with the lowest levels reported to be around $1,600 per 40ft for a 1 January start “for the larger volume shippers/forwarders”.
One European forwarder told The Loadstar: “Will be interesting to see if the next tender season (Q2 start dates) will be busier, with the expectation of being able to procure a lower deal after the CNY peak, which we saw being successful last year.”
They reported experiencing some space issues this month, particularly into the UK, adding: “Space is tight, carriers are only accepting up to allocation agreements for January. We have experienced multiple rollings, mainly on loops into Southampton as the Premier Alliance put a smaller vessel in, reducing capacity by 30%, which had a knock-on effect of creating roll pools and the Premier Alliance carriers are actively promoting Felixstowe now as their preferred UK port.”
And the forwarder expected spot rates to continue dropping, particularly after the CNY holiday.
“Carriers have already put forward reduced rates for February, and I’m being told, space is becoming available – I think we will see this as February progresses, and we will see spot rates back below the $2,000 per 40ft level.”
Source: Drewry Supply Chain Advisors
Mr Sand agreed with this assessment: “It looks like the pre-lunar new year cargo rush is behind us, so the market is set to turn further in the favour of shippers rather than carriers with further softening freight rates.”
As if to underline this, unsolicited offers from Chinese forwarders received by The Loadstar today included a quote of $2,200 per 40ft on China-West Mediterranean shipments.
Meanwhile, today’s Shanghai Containerised Freight Index, which often acts as a “forward curve” for the WCI, as it is compiled from quoted rates for the forthcoming week, suggest worse could in store for carriers.
It saw rates to North Europe and the Mediterranean down 11% and 12%, respectively, and down 10% to the US east and west coasts.
The WCI’s Shanghai-Los Angeles leg lost 4% this week, to finish at $2,442 per 40ft, while the Shanghai-New York leg was down 7%, to $2,969 per 40ft, as it remains clear that without further capacity cuts carriers will be unable to raise prices – for example, Far East-North America west coast capacity this week was some 3% higher than last week, according to Xeneta.
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