Friday, May 22, 2015

CONTAINER LINE CHAOS

In the land of the blind, is there a one-eyed king?

Battle for market share heats up as Asia- Europe box rates take a record tumble

By Mike Wackett & Gavin van Marle
05.22.2015 · Posted in Loadstar posts, Sea FavoriteLoadingAdd to favorites
Caligari
The battle for market share on the Asia-Europe tradelanes moved up a gear this week with a massive $214 per teu plunge in spot rates to North Europe and a $195 fall in rates to Mediterranean ports.
Today’s Shanghai Containerized Freight Index (SCFI) for North Europe is down 32.5% to just $444 per teu, having shed $417 in the past two weeks and conceding any gains from 1 May general rate increases.
In percentage terms, it was the single largest weekly drop on the trade.
And rates to the Mediterranean have all but matched this weakness as carriers made desperate attempts to fill ships out of Asian ports. The SCFI settled at $581 per teu, a drop of $195 per teu, representing a 25% fall.
Moreover, on Asia-US west coast legs, the SCFI slid a further $107, to $1,412 per 40ft, this week.
Container freight derivative broker Freight Investor Services (FIS) said this week’s declines “reflect a growing trend on the Asia-Europe trades of increasing rate volatility that started to rear its ugly head back in 2012 and has only worsened since”.
In its weekly commentary, FIS cites the example of the average weekly percentage change of the SCFI in 2010 being just 2%, whereas for the year to date this stands at a whopping 19% week-on-week variation.
Indeed, carriers that have dismissed the SCFI as irrelevant, due to their greater reliance on contract cargo to fill ships, now watch the index like a hawk as a guide to the relative health of the market.
And whereas in the past spot rate cargo was considered as only a top-up on the shipping lines’ main contracted business, this position has shifted significantly, and in many cases carriers are tapping the spot market for base traffic.
According to FIS, several carriers are reported to have been “aggressively chasing rates down”, with Maersk Line apparently “changing its stance” in a bid to regain market share it conceded to liner rivals in the first quarter.
However, undaunted by this “unstable” market situation, Maersk is proposing a $800 per teu GRI for Asia-North Europe on 1 June, while Ocean Three lead line CMA CGM is expecting even more with a $1,000 per teu hike.
Shippers now anxiously await the expected cancelling of sailings that will attempt to underpin these increases.
But there may be a silver lining for carriers: Drewry Supply Chain Advisors this week claimed contract rates had increased 1% between November 2014 and February, and some shippers have found themselves paying higher rates following the conclusion of annual contracts that ran from 1 May.
So why are container shipping rates seemingly moving in different directions? Drewry’s view is that carriers have consciously sought to exit unprofitable contract positions in anticipation of a very weak spot market through 2015. This has had the effect of pushing up contract rates for some shippers, despite the prevalence of weaker spot market pricing.
However, Drewry expects overall freight rate levels to fall this year.