The Shanghai Containerized Freight Index in European lanes fell for a sixth consecutive week despite attempts by carriers to implement various rate increases. “Westbound routes continue to fall to what must be very close to break-even, if not loss-making, territory,” noted Benjamin Gibson, freight derivatives broker at Clarksons Securities.
Recently proposed GRIs were unable to hold on to their gains or failed to create any increases at all. The March 15 general rate increase gave back all that it had originally achieved within four weeks, and the April 15 GRI never gained any traction at all. Further GRIs in this trade lane are set for mid-May. Hapag-Lloyd, Cosco and UASC have proposed increases of between $500 and $600 per TEU.
Rates to northern European ports fell 6.5 percent or $57 to $818 per TEU in the week ending April 26, according to the latest SCFI data, issued by the Shanghai Shipping Exchange. Rates have declined 42.5 percent or $605 during the six-week slump. The current SCFI index to northern Europe is approximately 57 percent lower than it was at the same point in 2012, and 35.6 percent lower than it was on Jan. 1.
The spot rate from Shanghai to Mediterranean ports also dropped this week, down 5.1 percent or $46 to $860. This rate declined 37 percent or $506 in the six-week period. The index is currently 56.5 percent lower year-over-year and 25.7 percent below where it was at the beginning of 2013.
“Expectations for a turnaround next month are slowly evaporating, with physical market participants reporting weak fundamentals and minimal demand. Not helping carriers is the apparent fragmented approach to May’s GRI. Some carriers are trying to push through the delayed April GRI at the beginning of the month while others are looking to push up rates come May 15. As we have seen in the past, unless there is a unilateral implementation date, then the likelihood is that the success of the increase will be limited at best. If we do see any increase during the month, this fragmented approach will ensure that it is short-lived,” said Richard Ward, research analyst for container derivatives of ICAP PLC.
“Moreover, with some shippers still able to achieve rates valid through the whole of May or even longer, then we could perhaps see a repeat of April. Because of this, expectations are that carriers will have to show a more aggressive approach, as such shippers are weary that another push could be announced for the months of June or July,” Ward said.