The Shanghai Containerized Freight Index was not published today due to the Chinese New Year, but despite some buoyancy in the trans-Pacific market analysts are downbeat on the prospect of rate increases once the SCFI resumes publishing next Friday, Feb. 22.
Trans-Pacific Rates Outperforming Asia-Europe
West Coast and Europe Week-to-Week Percentage Change
Source: Shanghai Shipping Exchange
“Market participants are … expecting a decline in rates to be reflected on next week’s index,” said Richard Ward, a container derivatives research analyst for ICAP, this despite Maersk Line’s announcement that it plans to extend the suspension of its AE-9 Asia-Europe service.
Rates in Asia-Europe have trended lower in recent weeks, losing $117 per 20-foot container or 8.2 percent over four consecutive weeks since Jan. 18 after achieving $200 in increases in early January rate increases. The expectation is that volumes won’t recover in the aftermath of the Chinese New Year.
In the trans-Pacific, Shanghai-West Coast rates tracked by the SCFI have drifted lower in recent weeks, losing $75 per 40-foot container or 2.9 percent; The trans-Pacific has outperformed Asia-Europe. In the former, rates have given up just 25 percent of a January general rate increase, but recent losses in the latter have erased 58 percent of the January hike.
In further evidence of relative strength in the trans-Pacific, the weekly Drewry Hong Kong-Los Angeles Container Rate Index, another trans-Pacific spot index, has performed even better than the SCFI readings. Since gaining $310 in mid-January, reflecting partial implementation of a scheduled January increase by member lines in the Transpacific Stabilization Agreement, the Drewry index has actually risen $12 per FEU and as of Wednesday was $322 or 14.5 percent higher than at the beginning of the year. Given that capacity in the trans-Pacific may be creeping upward, this may be considered a positive sign. ICAP said its slot capacity indicator for the trans-Pacific shows a slight increase (1 percent) when looking back over the past few weeks, while average weekly capacity in January 2013 was up 7 percent compared to November 2012. That said, there could be pressure coming in the trans-Pacific.
“In the run up to Chinese New Year demand is usually stronger,” Ward said. “After CNY, March and onwards, it will be interesting to see rate developments. I suspect demand will remain low, which will make it harder for carriers to maintain rates (in the trans-Pacific), especially if they increase capacity due to cascading vessels from Europe on to the U.S.”