Average spot rates on the Asia-Europe trade held onto most of the general rate increase that took effect on July 1, in part because the wreck of the MOL Comfort has taken some vessel capacity out of the trade.
After almost tripling to $2,622 per 40-foot-equivalent unit in the week of July 4, the Drewry-Cleartrade World Container Index for average westbound rates from Asia to North Europe remained relatively flat, slipping only $30, or 1.1 percent, to $2,592 per FEU in the week to July 11.
Despite the success of the July 1 GRI, the WCI this week is still 26 percent lower than the $3,521 it reached in early July 2012.
Still, this month’s spike has brought rates back to levels at the beginning of the year, largely because carriers are maintaining a hard line to stave off further losses on the anemic trade.
“The lines have obviously taken a very tough stance this time round to ensure there is minimum erosion,” said Neil Dekker, head of container research at Drewry Shipping Consultants in London. “The July 1 GRI has held up much better than in previous attempts because the rates were clearly very low and below break-even by the end of June.”
Carriers are reducing capacity by skipping some port calls as the continuing recession in Europe has put a damper of demand for westbound cargo shipments.
“It also helps that MOL had the involuntary scrapping of the MOL Comfort, and for a period the ships are out of action, temporarily replaced with smaller vessels,” said Lars Jensen, CEO of SeaIntel Maritime Research in Copenhagen.
The loss of the MOL Comfort, which had a nominal capacity of 8,100 20-foot-equivalent container units, impacts a number of Asia-Europe services operated by the G6 Alliance between the New World Alliance, to which MOL belongs, and the Grand Alliance.
Most of the carriers on the Asia-Europe trade announced plans over the past two months to raise rates by $1,000 per TEU on July 1. By last week, they had gotten most of the increase, which was almost triple the prevailing WCI spot rate of $922 per FEU the week before.
Following that success, many carriers already have announced another round of general rate increases, this time $500 per TEU, for Aug. 1. Rates are likely to fall off before then, however.
“I expect the Asia-Europe rates to continue to erode slowly in the weeks leading up to Aug.1, but I do expect the carriers to get part of the Aug. 1 increases, more driven by the momentum of keeping discipline than anything else,” Jensen said. “I’m not so sure they will be as successful as the July 1 increases, but they’ll probably get a fair bit of it.”
The rate erosion on the Asia-Europe trade going forward isn’t likely to be anywhere near as big as the precipitous declines that have followed every GRI earlier this year because vessel capacity is slightly down on the route.
“If I look ahead at the next six to 10 weeks, capacity is down about 3 percent on Asia-Europe compared to the same period last year,” Jensen said.
The photo included in this article is courtesy of gCaptain, which has been documenting the MOL Comfort story.