News / More blanked voyages expected as carrier efforts to drive up rates falter

Photo 146413051 © Tonyv3112 - Dreamstime.com

Container spot rates were largely unchanged for a third consecutive week, as it became evident that a 15 November rate hike on Asia-Europe trades had failed to have anything more than a marginal impact on pricing.

Drewry’s World Container Index (WCI) global composite rate declined 1%, although its Shanghai-Rotterdam leg edged up 1% and ended the week on $4,071 per 40ft, while the Shanghai-Genoa route was up 3% week on week, to $4,520 per 40ft.

Although these rates are some 255% and 229% higher year on year, forwarders on the trades remarked that repeated attempts recently by carriers to further lift spot freight rates appeared to have had little effect, and they were sceptical that the effect of new FAK (freight all kinds) rate levels scheduled for 1 December would be any different.

“Rate levels have been flat, we keep getting GRIs [general rate increases] but they quickly drop away, and we’re not expecting any significant rate increase for December to stick,” one told The Loadstar.

Traditionally, the final two months of the calendar year would see carriers and their customers hammering out the terms of the following year’s Asia-Europe annual contracts, and the level at which they are set is often guided by spot rate behaviour. Now, the trade waits to see if the 1 December FAK hikes stick.

This morning, CMA CGM announced an FAK of $6,500 per 40ft on Asia-West Mediterranean ports, the same rate MSC announced earlier this week, while Hapag-Lloyd will set a rate of $6,100 to North Europe and $6,400 to the West Mediterranean on the same date.

Given that achieving carriers’ desired rate levels would require a 50% week-on-week increase in Asia-Europe spot rates, the chances of these FAK hikes fully sticking appear to be close to zero.

Meanwhile, the calendar for the Asia-Europe contracts appears to have slid from a January-December set-up to Q1-to-Q1 arrangement, with many shippers reluctant to sign anything before Chinese New Year, set to begin on 27 January.

“We’ve had a busy tender season so far, but most clients seem to be holding out on negotiations post-CNY, which makes sense,” one forwarder told The Loadstar.

This was confirmed last week by Hapag-Lloyd CEO Rolf Habben Jansen, who told analysts during the company’s third-quarter earnings call that “it is still very early for the Far East contracting season”.

He added: “Yes, negotiations have started in many cases, but most of those contracts will only be closed in the first quarter.” And he said that, of “the early ones that have been closed, there we definitely see that rates are up. They don’t go to the level of spots, but they are definitely up compared to what we had before”.

Meanwhile, the WCI’s Shanghai-Los Angeles spot rate shed 5% this week, down to $4,488 per 40ft, while the Shanghai-New York leg was flat, at $5,210 per 40ft.

Carrier attempts to raise prices have seen a number of blank sailings announced in a short-term measure to curtail capacity – Drewry’s Cancelled Sailings Tracker reports 70 sailings cancelled between next week and the end of the year, representing some 10% of scheduled departures globally.

It said that 50% of these would be on the transpacific eastbound trade, 27% on the transatlantic westbound and 23% on Asia-Europe westbound, and the consultancy warned shippers and forwarders that further blanks could be on their way, while schedule reliability may also take a hit.

“Over the next five weeks, we anticipate a decline in schedule reliability, with approximately 10% of vessels expected to miss their scheduled sailings.

“To sustain higher rates, carriers are likely to implement additional cancellations, cargo owners operating in this trade should proactively prepare for potential disruptions,” it said.