News / Storm clouds darken on Asia-Europe box trade as carriers struggle with rates

© Calvin Leake

The storm clouds on the major east-west container trades continued to darken this week as attempts to hike freight increases appeared to falter and fuel costs continued to rise.

On the key Asia to Europe tradelane, spot rates – which account for over 50% of the liftings and heavily influence contract rates – are some 16% below the level of a year ago, whereas bunker costs have leapt by around 50%.

The North Europe component of the Shanghai Containerized Freight Index (SCFI) slipped 2.2% this week to $793 per teu, as carriers failed in their attempts to increase FAK rates.

One reader told The Loadstar this week Maersk Line’s new FAK rates for the second half of May of $1,025 per 20ft and $1,800 per 40ft were withdrawn on 10 May and reduced back down to $825 and $1,400, after the carrier allegedly “got the shakes”.

It brought Maersk back in line with main rivals 2M partner MSC and CMA CGM, although other carriers were reported to be offering rates some $200 per feu below this level.

The difficulty of gaining recompense for the rising cost of fuel was the primary issue discussed during Maersk’s Q1 earnings call yesterday, when the transport group endeavoured to explain its unexpected $239m loss. Chief commercial officer Vincent Clerc said it had been “difficult to pass on the full extent of the fuel cost increase to customers”.

He said this applied both to contract business, where he stated that around 80% had a built in mechanism for a BAF surcharge, and “in the short-term [spot] market in some areas where we have faced strong capacity injection”.

He added: “The situation has been a bit tenser on east-west, where significant capacity injections in Q1 have been a big impediment in achieving the increase that we are targeting and has not enabled us to pass on fully the higher fuel cost to our customers.”

Carriers on the route will make another attempt to hike rates on 1 June, CMA CGM increasing its FAK rates to $950 per 20ft and $1,800 per 40ft from its May level of $850 and $1,600.

For Mediterranean ports, this week’s SCFI recorded a slight uptick in spot rates to $795 per teu, and it appears that carriers see better prospects for rate hikes on this route; CMA CGM is asking for $1,000 per 20ft and $1,800 per 40ft from 1 June.

Meanwhile, this week’s SCFI reading for the transpacific tradelane recorded a second week of declining prices as spot rates from Asia to the US west coast fell by 5.4% to $1,308 per 40ft, while for the east coast rates were down by 1.4% on the week to $2,331 per 40ft.

Explaining the lag of one to two quarters before fuel surcharges kicked in, compared with the around eight weeks delay before the extra cost of bunkers hit its accounts, Mr Clerc told analysts it was “pretty dicey” to renegotiate contracts and ensure that a sufficient quantum of fuel cost had been included.