News / Weak capacity discipline forces Gemini carriers to slash Asia-Europe rates

Photo: Hapag-Lloyd.

Gemini Cooperation carriers are said to be slashing rates to fill slots as Asia-North Europe rates registered their sharpest weekly drop since February.

On Friday, the Shanghai Containerised Freight Index showed the Shanghai-North Europe rate down 11% from the previous week, to $1,315 per teu.

But Hapag-Lloyd’s latest online quotation was $680 per teu and $1,060 per 40ft, basis Shanghai-Rotterdam.

However, it should also be that the rate quote is solely for the ocean freight component, and does not cover other freight-related charges which are subject to the basic ocean freight, especially bunker fees such as Marine Fuel Recovery (MFR) charges.

In addition, forwarders said the index did not give a full picture and, with ample shipping capacity, real-time rates were often lower than that which the SCFI shows.

Consultancy Linerytica said mainline operators had abandoned a general rate increase for 1 September, allowing rates to slip further, in the absence of capacity discipline.

Linerlytica said: “Carriers’ reluctance to remove surplus capacity continues to be the bane of the market, with the limited Golden Week blank sailing programme in early October a further sign of the lack of discipline.

“Gemini carriers in particular [Hapag and Maersk] will take out just one out of the 16 scheduled Asia-North Europe sailings in October, after maintaining a full sailing slate since April.”

And, with just the single sailing removed, Linerlytica said Gemini’s much-anticipated announcement of its own blank sailing plan on 4 September had disappointed the market.

With MSC’s announced blanked sailings on the trade, average weekly Asia-Europe capacity is projected to drop to 288,000 teu next monthr, down from 320,000 teu in September and compared with 310,000 teu in July.

Linerlytica added: “Golden Week blank sailing programmes announced so far for October have been unconvincing, with Gemini carriers unwilling to withdraw surplus capacity and prepared to slash rates to maintain schedules.”

According to the Xeneta/eeSea liner database, total Asia-Europe capacity offered by carriers this month is set to be 1.87m teu, with just 15,000 teu currently slated to be blanked – although that is understandable given that September remains part of the traditional peak season.

The database’s forecast for October capacity on the trade currently stands at 1.69m teu, with 227,000 teu set to be blanked.

By way of reference, eeSea records August capacity to have amounted to 1.78m teu, with 174,000 teu blanked; while July stood at 1.79m teu, with 217,000 teu omitted.