After a brief period of relative stability, sea freight rates on the Asia-Europe trade appear to have begun their rollercoaster ride once more, as the end of the Chinese New Year signals the beginning of a new seasonal period.
Last week, the Shanghai International Freight Index (SCFI) witnessed its largest decline in a single week on the Shanghai-North Europe leg since the index was launched in late 2009, with the all-in spot rate losing 12% of its value dropping by $188 per teu, from $1,567 per teu recorded at the end of week six to $1,379 per teu at the end of week seven.
According to one broker, the decline resulted in carriers losing a combined $65m in revenues, and although the current rate level remains above the break-even level for shipping lines – at today’s fuel prices, and with the cost-efficiency of slow steaming added into the mix, this is generally accepted to be around $1,000 per teu – the consensus amongst analysts is that now the downwards spiral has begun, it is more likely to continue than not.
It is no surprise that a number of carriers have begun to announce general rate increases on both the Asia-North Europe and Asia-Mediterranean trades, ranging from around $400 per teu (Maersk, on its Asia-Med services) up to $730 per teu (NYK, to both the Med and North Europe), which are scheduled to come into effect in the first half of March.
However the most likely upshot of these GRI’s will be to introduce a brief spike in sea freight rate levels, followed by a period of downward pressure, as carriers are not expected to cut back on capacity in any meaningful way.
Drewry Maritime Research believes that whatever the levels of demand up to the end of the second quarter, the nearer the industry gets to the launch of the P3 Alliance, the more protective other carriers will be of their market share and thus increasingly reluctant to withdraw capacity, possibly pushing it once more into a period of sustained losses.
“Regardless of cargo growth this year, carriers will remain sensitive to market share threats, including the arrival of the P3’s services in the second and third quarters and the large number of vessels over 10,000teu awaiting delivery,” it said in a recent research note.