News / Rates war or not, ocean volumes and load factors are falling as slack season looms

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Container lines operating Asia-Europe services will cumulatively cancel no less than 14 sailings early next month.

It’s a bid to compensate for the expected dip in demand after the Chinese Golden Week holiday and the beginning of the traditional slack season.

Carriers are anxious to underpin the contract rate gains of the past year that have translated into a turnaround in their fortunes, and are well aware of the consequences of a fresh rate war.

And in a show of hitherto absent discipline, all ocean carrier members of the three vessel-sharing alliances have now announced capacity reductions via blanked sailing programmes.

Meanwhile, the European components of the Shanghai Containerized Freight Index (SCFI) this week recorded another fall in spot rates, down 5.3% for North Europe, to $769 per teu, and by 3.7% for Mediterranean ports to $730 per teu.

According to Drewry, spot rates have come under pressure from “less-than-expected-demand” immediately ahead of the Chinese holiday that begins on October 1, which it attributed to “the [Chinese] government’s crackdown on polluting factories”, forcing “massive closures”.

But in contrast to Alphaliner, which this week suggested that the rate truce between carriers was “crumbling”, Drewry did not believe that the spot rate slippage heralded a new rate war on the trade.

Neil Dekker, director of research, containers, at Drewry, told The Loadstar: “There is no rate war at the moment, but there has been a definite softening of rates on a number of headhaul routes in recent weeks.”

Mr Dekker referred to the factory closures in Beijing, Shanghai and Guangdong since the beginning of August as the key reason for the demand blip.

He said: “Carriers report weakening volumes and lower load factors at a time that should usually coincide with the peak season surge on east-west routes.”

This has hobbled carriers’ plans to increase FAK (freight all kinds) rates to Europe and to introduce GRIs for the transpacific.

However, spot rates between Asia and the US rebounded a little this week. According to the SCFI, rates to the US west coast were up 7.7% on the week to $1,586 per 40ft and ahead by 1.7% to $2,269 per 40ft for US east coast ports.

Elsewhere, the SCFI recorded significant reductions in spot rates for West Africa – down 8.8% to $1,293 per teu – and South America, down 6.7% to $2,091 per teu.

Mr Dekker explained that the improved trade flows to West Africa and the South American east coast had “encouraged some players to either insert extra loaders or new loops, in the case of West Africa”, which he said had “upset fragile supply-demand fundamentals” on the routes.

He suggested that the carriers had “undone a lot of their good work”, on these two trades in particular, but nevertheless rates were still not at the “awful lows” plumbed previously.

Patrik Berglund, chief executive of ocean freight benchmarking and data analyst Xeneta, told The Loadstar today he was seeing the “basis for a much healthier market”.

“There are no low rates anymore,” he said, “and unless they [the carriers] do something very stupid, the outlook is encouraging for contract rate renewals.”