NYK ships

After three consecutive weeks of decline, Asia-Europe container spot freight rates this week bounced back, ahead of Monday’s GRIs and FAK increases.

The boost comes not a moment too soon for ocean carriers posting some of the worst quarterly results in the history of liner shipping.

As the peak season began in earnest and shippers scrambled to secure space, the Asia-Europe components of the Shanghai Containerized Freight Index (SCFI) leapt 57.8% to North Europe and 51.2% to Mediterranean ports, taking spot rates to $1,125 and $1,004 per teu respectively.

Container lines desperately need to hold onto these spot rate gains and squeeze as much out of shippers as possible during the peak season to achieve a profitable third quarter after what appears to have been a disastrous Q2 for the industry.

With the August interim-reporting season starting in earnest next week, there has already been a profit warning from Hapag-Lloyd and worrying operational numbers from OOCL.

Today saw Japanese shipping groups K Line, MOL and NYK all report heavy losses in their liner sectors for their fiscal first quarter, all three bemoaning extremely poor trading conditions between April and June.

“The average freight rate of the group fell below previous year levels across all routes as a result of a deteriorating supply-demand balance globally,” said K Line.

The third calendar quarter this year is likely to be more critical than ever for ocean carriers needing to recover from second-quarter and first-half losses. Their aim is to return to profitable trading on their major service lanes, building a strong platform for 2017 contract negotiations.

Meanwhile, spot rates between Asia and the US also stabilised this week after last week’s decline, with the US west coast ticking up by a modest 2%, to $1,322 per 40ft and rates for the US east coast gaining 12.3% to $1,958 per 40ft.

The improvement came after carriers reduced capacity – notwithstanding peak season demand – in response to weak pricing on the route. Carriers plying the transpacific have suffered year-on-year lower contract rates, dragged down by low spot rates.

NYK said today: “Negotiations for the renewal of annual contracts in May ended with poor conditions, negatively affecting profitability.”

MOL also blamed the Asia-US trade for some of its financial woes. “The market continued to be difficult overall, due to significant falls in one-year contract rates, notably on the Asia-North America routes,” it said.

Nevertheless, with the exception of spot rates to Singapore, which were down slightly on the week, all other components of the SCFI were in positive territory this week, enabling the comprehensive index to record an overall 18.6% gain to 745.2 points.

Spot rates on the South America (Santos) route continued upwards, gaining 7% to $2,723 per teu – offering a reminder to carriers of the benefit of adjusting supply to suit demand – while rates to South Africa surged by 108.8% on the week, to a recovering $643 per teu.

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