Container spot rates creeping up on major east-west trades

Container spot rates creeping up on major east-west trades

Spot rates have managed to rise for two consecutive weeks. Photo credit: ZIM

Spot rates on the four major east-west trades could only inch upwards as rate increases continue to have a limited impact on prices being charged for container transport.

About the only positive carriers can take away from the movement of spot rates on the Shanghai Shipping Exchange’s SCFI is that a wide range of Nov. 1 rate increases at least managed to bump up prices for the second consecutive week. The weekly SCFI movements are published under the Market Data Hubon JOC.com.

Carriers on the Asia-US trades levied general rate increases ranging from $600 to $1,000 on Nov. 1 and the increase can be regarded as successful only in that it managed to stop the steady slide in rates that troubled carriers through the peak season.

The China-US East Coast rate this week rose just $14 per FEU to $2,089 per FEU, $334 per container higher than it was two weeks ago. Rates from China to the US West Coast rose $36 to $1,548 per FEU.

Retailers are attempting to have their final shipments of holiday merchandise received in the United States by early November so the products will be on store shelves for the Black Friday sales on the day after Thanksgiving, and this has led to a surge in imports in the past two weeks.

On China-Europe, the rate went up $35 to $779 per TEU and the precipitous slide of transport prices that began in July appears to have turned around. Rates are still $134 per TEU below where they were at the same week in 2016 when the rate declined until late November before shooting up to a New Year’s Eve high of $1,168 per TEU.

China-Mediterranean were up $20 to $660 per TEU, the first week the rate has risen since June when the price was $291 higher than it is this week.

SeaIntel said that now the peak season was over, carriers will be looking back at a 2017 that promised a lot, but only delivered on volumes and not on rates. “Rates seem to have been anaemic as the demand simply could not soak up the excess capacity, especially as carriers have almost completely avoided blanking sailings in 2017,” the analyst said.

Not even robust third-quarter throughput figures at Chinese ports could push up rates, even though the ports recorded 9.3 percent growth in the period from July to September while total volumes increased by 9.1 percent in the first nine months of the year.

The improving container shipping market this year has encouraged global carriers to either order or consider placing orders for giant new vessels, but not all CEOs are confident in the the industry’s business prospects.

The CEO of independent containership owner Danaos Corporation, John Coustas, has low expectations for 2018 and he said there would only be more clarity on the state of container shipping for the larger vessel segment in the spring of 2018.

“We do not expect a material improvement in the market environment next year, given the large number of vessel deliveries scheduled for 2018,” said Coustas while announcing the shipowner’s third quarter financial results.

Despite the structural overcapacity in the market, a Korean news agency has reported that Hyundai Merchant Marine is considering orders for new 20,000 TEU vessels. HMM told Fairplay, JOC.com’s sister publication within IHS Markit, that it had not yet made any decision on vessel orders, but the largest ships in its fleet can carry 13,000 TEU while its 2M Alliance partners are operating those with capacity closer to 20,000 TEU.

In September, the 2M Alliance’s Mediterranean Shipping Company ordered 11 ships of 22,000 TEU for delivery in 2019, and the Ocean Alliance’s CMA CGM has ordered nine of the ships. Cosco Shipping has 11 ships of between 20,000 and 21,000 TEU under construction for delivery in 2018 and 2019.

Nevertheless, Alphaliner said global container throughput growth was on track to exceed 6 percent in 2017, driven by strong volume growth across all main regions. The strong container volume growth this year is expected to lift the TEU-to-GDP multiplier to 1.7 times global GDP growth, reversing the recent downward trend that has seen the multiplier drop to below 1.0 in the previous two years.

Global economic recovery is continuing, with the IMF lifting its global GDP growth forecast for 2017 and 2018 to 3.6 percent and 3.7 percent respectively in its latest World Economic Outlook report released on Oct. 10, rebounding strongly from last year’s 3.2 percent growth rate which was the lowest annual growth rate since the global financial crisis in 2009.

Alphaliner said the improved outlook was reflected in the latest container liftings statistics, with the Asia-Europe and Transpacific headhaul routes registering 5.3 percent growth based on year-to-date data to August/September from CTS and PIERS respectively, compared with full year growth rates of 2.8 percent and 4.3 percent in 2016.

Drewry said during the first week of November, to cash in on the expected uptick in demand before the Christmas holidays, the carriers implemented GRIs on the East-West routes originating from Asia. As a result, the analyst’s World Container Index between Shanghai and Rotterdam gathered $462 per FEU to reach $1,716. On the trans-Pacific trade, rates on Shanghai-New York strengthened by $615 to reach $2,404 per FEU while its index showed rates from Shanghai to Los Angeles rising by $313 to $1,634 per FEU.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.