Alphaliner Says Asia-Europe Rate War Not Driving Out Carriers

The rate war waged by leading ocean container carriers on the Far East Asia-North Europe trade has so far failed to drive out smaller rivals, according to Alphaliner.

“There is no immediate relief in sight for carriers engaged in the war of attrition,” with freight rates set to fall below current unprecedented low levels in the coming weeks, the container market analyst said.

Spot freight rates quoted by the Shanghai Container Freight Index have sunk to $540 per 20-foot equivalent unit. And the average Bunker Adjustment Factor stands at $755 per TEU, implying a negative base ocean freight rate of $215 per TEU, excluding surcharges.

By the Numbers: SCFi- Shanghai Containerized Freight Index

“The low ocean freight rate is unprecedented, with negative base rates offered in the market since September,” Alphaliner said.

Forward rates on the Shanghai exchange anticipate only a “mild” recovery in freight rates in late January due to the expected increase in volumes during China’s pre-Lunar New Year period. Freight rates should however remain below BAF levels, according to Alphaliner.

“The attempt by some carriers [Maersk being the most frequently cited] to force out their competitors through a destructive price war has so far failed to achieve any results.”

Maersk has made clear it is ready to sit out a rate war to boost its leading market share on its biggest trade. “We are actually quite well positioned for a longer stretch of tough competition … it would be natural if the smaller players in this business, or their banks, start questioning whether it’s a good idea to keep competing,” Nils Andersen, CEO of A.P. Moller-Maersk, said in early November.

So far there have been only limited capacity cuts, even as freight rates are expected to remain depressed until the end of the slack winter season.

Three “strings” have been withdrawn in 2011 with a fourth service to be shuttered in December, representing only 8.6 percent of the total capacity on the route. These withdrawals have had a negligible impact on overall load factors, which have remained below 90 percent on average throughout the year, Alphaliner said.

Sixty-three new container vessels over 10,000 TEUs are scheduled for delivery over the coming 14 months — a rate of roughly one a week — and most, if not all, will be deployed on the Asia-Europe trade.

-- Contact Bruce Barnard at brucebarnard47@hotmail.com.