Golden Week,
not a golden age - October 2, 2015
With Golden Week holidays underway there was no SCFI published this
week, offering carriers a chance to take stock of what proved to be a
terrible September.
Rates fell 59% during the month from $763 to $313 TEU as reported on
September 25th. Last week alone saw the second largest ever
fall in percentage terms of 31%, only surpassed by the 33% decline
recorded back in May this year. At current levels rates are now 62%
lower than the same period of 2014.
Even more worrying from a carrier perspective is that rates are fast
approaching, if not already entered into, negative freight territory
for the second time in less than six months. With BAF charges for
October on the Asia-Europe route anything from sub-$200 a TEU to $400
TEU, surely another big rate push is on the horizon?
However the jury is out on whether there is much hope this will stick
given the most recent failure of the September 20th GRI.
Looking further ahead, reports already suggest that Q1 2016 rates of
around $600-$700 FEU are being bandied about on the Asia-Europe trade,
suggesting little to no expectation for a significant increase in rates
in the short to medium term.
With such dismal quarterly rates apparently achievable carriers may
find themselves repeating what we saw at the start of 2015 when they
struggled to lift rates in the run up to Chinese New Year,
traditionally the one period when market conditions offer some support
to GRIs.
With such low average rates year-to-date ($649/TEU) questions will
remain as to whether large beneficial cargo owners will stick to their
traditional yearly contracts given that spot paying customers were at
times outperforming some of the very largest BCO contracts.
Some of these large shippers had renegotiated their contracts, giving
in to the pressure of trying to ‘outperform the market’ at a
substantial time cost no doubt for both parties.
As a result perhaps a capped or floating rate would be more efficient
for both shipper and carrier heading into 2016?
SCFI NWE Average
Year-To-Date: $650 / TEU
Average Rate Of
Contract Capped At $750: $571/ TEU
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