The Shanghai Containerized Freight Index saw rates in European lanes plummet one week after a general rate increase was implemented by Asia-Europe carriers, including APL, CMA CGM, OOCL and Hapag-Lloyd.
In the week ending March 15, Asia-Europe trade lanes saw an increase of about $400 per 20-foot container, indicating carriers had achieved around 60 percent of the proposed $700 per TEU increase. They gave up much of the gain this week, however, with sharp declines in both the Asia to North Europe and Asia to Mediterranean lanes.
This week, however, rates to northern European ports fell 11.9 percent or $169 per TEU to $1,254. The current spot rate to northern Europe is 8.5 percent lower than it was at the same point in 2012 and 1.3 percent lower than it was on Jan. 1.
Rates from Shanghai to Mediterranean ports fell 11.1 percent or $152 this week to $1,214. The index is currently 11.8 percent lower year-over-year but 4.8 percent higher than it was at the beginning of 2013.
“The volatility that plagued Asia westbound trades last year continues to destabilize the freight market. In some way, the big reverses in spot rates recorded today goes some way to justify the weakness in the physical market that was being talked about pre-GRI,” said Benjamin Gibson, freight derivatives broker at Clarksons Securities.
Richard Ward, research analyst for container derivatives of ICAP plc, predicts that this will not be the last large drop in these trade lanes: “Market feedback is that rates still have some way to fall with levels around USD 950 -1,100 being discussed in the market. This would represent potentially another significant drop on the index for next week.”
Ward noted that other carriers have followed Hapag-Lloyd in announcing another general rate increase for April 15, including Maersk Line, MSC and Cosco.
“It is clear that carriers are attempting to stop the rot in rates, but April is likely to follow a similar fate to that of March,” Ward said. “By announcing such GRI’s, and then seeing them erode almost instantly, the carriers themselves are fuelling their own rate volatility.”