Spot container rates from Asia to Europe measured by the Shanghai Containerized Freight Index fell in the week ending Aug. 9, losing part of the increases they achieved as a result of a proposed general rate increase set for Aug. 1.
Since the increase took effect, the North Europe and Mediterranean lanes had each achieved about 52.0 percent of the $500 per 20-foot-equivalent-unit increase announced by Hanjin Shipping, MOL, OOCL, Mediterranean Shipping Co., Hyundai Merchant Marine, Hapag-Lloyd, Zim Integrated Shipping Services, Cosco and United Arab Shipping Co. Maersk Line set a smaller increase of $300 per TEU and Evergreen, $400 per TEU. These gains did not hold up.
“Despite carriers' recent success in increasing rates, the fundamentals are still not strong enough to sustain a prolonged increase without more GRIs. As a result, rates have again returned to their downward trend,” said Richard Ward, research analyst for container derivatives at ICAP.
The spot rate from Shanghai to northern European ports fell 4.3 percent or $65 this week from the week before to $1,436 per TEU. Its achievement level from the Aug. 1 GRI fell to 39.0 percent. The current SCFI index to northern Europe is 10.9 percent below where it was at the same point in 2012, but 13.1 percent higher than at the beginning of 2013.
The spot rate from Shanghai to Mediterranean ports slid 5.6 percent or $83 in the week ending Aug. 9 from the week before to $1,410 per TEU, according to the latest SCFI data issued by the Shanghai Shipping Exchange. The current SCFI index to the Mediterranean is 9.0 percent below where it was at the same point in 2012, but 21.8 percent above Jan. 1.
Further increases in this lane have been proposed for Sept. 1. UASC, NYK and MSC have set increases of between $300 and $500 per TEU for cargo on the Asia-Europe lane. Hapag-Lloyd also announced a GRI of $500 per TEU in this lane for Sept. 2.
“Despite analysts pointing out the better control of Asia-EU capacity over the trans-Pacific and the improved year-over-year volumes, the fall in SCFI Europe lanes really highlights the fragile nature of these GRIs and as a consequence we have started to see derivatives sellers taking a more aggressive approach and the forward curve is losing its premium as a result,” said Benjamin Gibson, freight derivatives broker at Clarksons Securities.
“With reporting season under way, it is clear that the trend of falling freight rates have yet again negatively affected the financial performance of carriers. Those carriers failing to implement successful risk management policies will no doubt continue to be financially harmed by the aforementioned drop in rates,” Ward warned.