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Weekly
Commentary
Rate declines
on the Asia-North Europe trade have accelerated in recent weeks with
last week seeing the largest decline ever recorded on the trade in
dollar terms of $314.
This week the drop of $265 was the largest ever in percentage terms at
39.3% and means rates now stand at $409 TEU.
This year rates have declined by more than $150 in a single week on 10
occasions. Previously since the launch of the SCFI in 2009 such large
weekly rate declines had only been witnessed 4 times on the trade,
suggesting worsening rate volatility and continued weakness on the
trade.
Such large weekly rate declines have been exacerbated by forwarders
providing quoted rates to shippers that have yet to be secured with a
carrier, resulting in an added requirement to force the market down to
meet the pre-arranged unsecured rate.
Such risk in the market is not uncommon, however forwarders should at
least be referring to the forward curve in such instances to better
understand the risk involved and how it could be reduced whilst still
wining new physical business.
Elsewhere last Friday saw the release of Maersk’s Q3-2015 results which
showed a decline in average freight rate per box of 19% year-on-year,
reflecting the marked deterioration in rates over the past 12 months.
With contract rates being discussed for next year in the region of $700
FEU, almost a 50% reduction on last years contracted rates, there will
be extreme pressure on carriers to boost the struggling spot market
during 2016. Given rate developments this year and the likelihood for
continued poor fundamentals this looks increasingly difficult to
achieve and could result in yet more dismal results for the industry as
a whole.
Carriers do of course have the option to hedge some of this future risk
at levels substantially above the aforementioned contract rates and
should appear increasingly attractive to those looking to minimise
losses and secure future cash flows.
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