Asia-Europe spot rates still under pressure and carriers eye more blanked voyages

Posted by Richard Strauss

Source: Loadstar

Container spot rates from Asia to North Europe have fallen for the fifth consecutive week.

Today’s Shanghai Containerized Freight Index (SCFI) reports a further erosion, of 2.7% to $714 per teu, for North Europe. This compares with around $950 at the beginning of August.

Carriers on the route were unable to “stop the rot” with their FAK (freight all kinds) hikes during the August and September peak season and will be concerned about further rate slippage as the industry enters the traditional slack season.

This begins next week with the Chinese Golden Week holidays. Demand for the immediate period following is said by carriers to be “weak”.

For Mediterranean ports, spot rates slipped 2.4% to $692 per teu. And online freight marketplace platform Freightos told The Loadstartoday its reading for early October was “consistently flat” rates from Asia as a whole.

Based on the reduced cargo prospects, carriers have announced that they will blank at least 14 sailings for Europe immediately after the Chinese holiday; but in order to prop up rates the blanking programme may need to be extended, or even loops temporarily suspended.

Aggravated by a number of factories being shut during the peak season by Chinese environmental regulators, spot rates came under renewed pressure at a time when they would normally be strong.

Alphaliner said that there was “a clear sign that rate cutting is starting to take hold again”, although Drewry disagreed and said there was “no rate war at the moment”, despite price levels softening.

Indeed, carriers could see all their good work of the first three quarters ruined by sub-economic rates in the final three months of the year. And continually softening spot rates in the next few weeks will have a negative impact on 2018 contract negotiations.

No doubt with this in mind, several carriers serving the route have announced FAK rate hikes for 15 October.

Meanwhile forwarders The Loadstar has spoken to recently have expressed concern about renewed rate volatility on the trade – not least because of the possibility that their customers could be targeted by rivals that have obtained budget rates from carriers, although these do not come with guarantees of shipment when space is tight.

UK-based forwarder Westbound Shipping Services explained that there was now a two-tier system of rates quoted by carriers: “budget” and “VIP”.

“In most cases, we are seeing differences of $200-$300 on these choices,” said Westbound.

It claims that when space becomes tight on vessels departing Chinese ports, loading of “budget” containers becomes “a lottery” and some boxes already on board have been discharged to the quay to make way for “VIP” contract cargo.

Meanwhile, a similar picture is emerging for the transpacific, with rates coming under pressure and carriers endeavouring to stem the tide with blanking programmes.

This week the SCFI recorded a second week of losses for the US west and east coasts. For the former, rates declined by 4.7% to $1,414 per 40ft, while for east coast ports there was a drop of 5.4% to $1,991 per 40ft.

At the beginning of August, spot rates for the US west coast stood at around $1,680 and for the east coast around $2,680