Spot rates in the Asia-Europe trade weakened again this week — the third consecutive week of decline — despite carrier attempts to trim surplus capacity that is eroding recent general rate increases.
Rates have declined by $188, or 4.5 percent per 40-foot container equivalent unit, in the three weeks since carriers put through a general rate increase ranging between $400 and $500 per 20-foot equivalent unit.
The World Container Index of spot prices in the trade from Shanghai to Rotterdam, compiled by Drewry and the Cleartrade Exchange in Singapore, fell by $78 on July 26, or 0.2 percent, to $3,333 per laden FEU from $3,411 per FEU on July 19.
Spot rates have been declining slightly from week to week in spite of the fact that carriers, including the four members of the CKYH alliance and Maersk Line, are skipping some port calls in China in an effort to reduce capacity.
“The Shanghai-to-Rotterdam WCI decreased again this week due to weak demand in Europe and the fact that freight rates had jumped to unsustainably high levels,” said Philip Damas, director of Drewry Supply Chain Advisors. “But despite the recent erosion of rates, they are still much higher than a year ago.”
Nevertheless, Drewry expects some softening in pricing through the second half of the year as continuing market weakness weighs on rates.
Despite the pattern of rate decreases after each GRI, this week’s WCI is still 171 percent higher than the WCI of $1,230 per FEU on Jan. 5, which reflects the carriers’ discipline in maintaining those rate increases until the last several weeks. It is also 121.1 percent higher than the index of $1,507 per FEU in the same week last year.
But the implementation of peak-season surcharges has not been successful, and the delivery outlook is casting a long shadow on rates.
Janet Lewis, head of industrial and transportation research in Asia at Macquarie Capital Securities, said she is not hopeful much of the peak-season surcharges will stick. “Rather, the risk is on the downside due to ongoing deliveries.”
New ships with a capacity totaling 582,000 TEUs are still due to be delivered in 2012, the equivalent of about 3.6 percent of the global fleet, of which 194,000 TEUs are ultra-large container ships and another 152,000 TEUs are in the 8,000- to 10,000-TEU capacity range.
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