Global carriers unable to fill their ships
Both of the major east-west tradelanes recorded significant falls on the Shanghai Containerized Freight Index (SCFI), reflecting an increasingly soft demand environment. The Asia-Europe components of the SCFI saw container spot rates for North Europe decline 8.3% to $831 per teu, and rates for Mediterranean ports lose 6.8% to $857 per teu.
Despite ocean carriers cancelling 13 Asia-North Europe sailings to mitigate the impact of post-Chinese New Year weak demand, the lines have still been unable to fill their ships and, as a consequence, spot rates are starting to tumble.
Shipping Lines withdrawing capacity from Asia Europe trade
One forwarder source told The Loadstar this week he had been offered $300 off of his current 40ft rate for the next two weeks. According to Alphaliner data, the 2M alliance has blanked the most westbound voyages, six, including its decision this week to cancel the AE2/Swan loop from its 2 March slot.
The Ocean and THE alliances have so far each withdrawn three sailings from the route, while one voyage of the standalone HMM services has also been pulled. “Any further deterioration in spot rates could trigger further capacity withdrawals,” said Alphaliner.
Market is extremely volatile according to CCO Vincent Clerc from Maersk
Speaking during the Maersk 2018 results earnings call yesterday, chief commercial officer Vincent Clerc said the European contract rate season had been completed and that the strength of rates at the end of last year had afforded the carrier “a better environment to negotiate”, and that they had been fixed “in line with a better climate”.
However, Mr Clerc offered a note of caution: “I just want to remind you also that half of our business is actually short-term business that we negotiate either monthly or weekly, and that’s really where there is a lot of risk, even after the contracting season is done – a lot of risk is going to play out, because it is a significant part of our business and it is an extremely volatile part of the business.”
Spot rates weakening from Asia to US
Meanwhile, the SCFI recorded a further weakening for spot rates from Asia to the US, which is unfortunate timing for carriers as the transpacific contracting season gets under way. Rates from Asia to the US west coast fell another 6.2% to $1,720 per 40ft and have now slumped by 14% since CNY. For the east coast, spot rates declined by a further 4.4% to $2,837 per 40ft.
Nevertheless, due to the spike in demand caused by the front loading of cargo to beat the threatened 2 March deadline for 25% duty on a raft of US imports from China, rates for the west coast are 22% higher than the same week in 2018, which supports the aspirations of carriers looking for 20%-plus hike in contract rates.
Guillotine above neck of Transpacific traffic
But the sentiment is negative, putting carriers back on the back foot and encouraging BCOs to drag out contract negotiations.
George Griffiths, editor of the Global Container Freight Market at S&P Global Platts, said: “With the US still very well stocked, there appears limited demand from the Chinese market, especially with the guillotine that is the US-China tariffs hovering just above the neck of any transpacific traffic.”