Asia-Europe Container Freight Rate Market Collapse
May May bring the desired recovery from the current rate collapse carriers are facing on the spot market? What emergency strategies do carriers seem to have up their sleeve?
Current Situation
Half way in to April, carriers seem to stand helpless against successive rate restoration failures. Shanghai Containerized Freight Index has hit an all-time record lows both on routes from Asia to North Europe (466 USD/TEU) and Mediterranean (607 USD/TEU).
As can been seen on the infographic, the snowballing drops that have added up since the beginning of 2015 having contributed strongly to the impressive 60% fall agianst a year ago on the North Europe trade, while the Mediterranean rates have also plummeted to less than half.
What can be expected during the next weeks
As I have mentioned before it's mostly about the discrepancy between supply and demand.
Thus, according to FIS, carriers are preparing to put in to action more drastic measures that may compromise service quality such as “ad-hoc sailing cancellations during the month of May”, that are to be combined with “another GRI attempt”. FIS mentions that the disturbance caused to shippers by the cancellations may maximise the success of May’s GRI.
The Loadstar is a bit more alarmist, having informed yesterday that shippers may come in to hand with a “supply chain chaos” during the next two months, as many of the Far East to Europe top carriers blanking programmes are being advised to customers under very little notice. According to the Loadstar not even the world’s largest container vessel is safe: “the maiden voyage of the 19,224 TEU MSC Oliver was a notable casualty of the supply-demand crisis plaguing the route after being temporarily idled in China as part of the 2M alliance’s vessel blanking programme”.
Also contributing to the current container shipping freight market situiation, according to Hellenic Shipping News, are the “deteriorating exports from China for three months running in 2015. Export were down by 15% in March y-o-y.” According to the online shipping newspaper “The link between the global economics, external trade and the shipping industry is once again clearly felt in the freight market.”
IHS Maritime 360 quotes Chief Shipping Analyst at BIMCO, Peter Sand, refering to the current supply/demand imbalance in quite a pragmatic and interesting summary of the market’s status quo. “Striking the right level of supply to match the actual demand for transportation on this key container ship trade route has proven impossible recently. The re-activation of almost the entire idle fleet during the autumn, in a combination with the continued inflow of new Ultra-large container ships on the Far East to Europe trades has yet again, developed a situation where overcapacity sours the freight market.”
International Trade and Compliance Manager at Woodland Group Ltd
9yThere is certainly a trend I'm seeing in shippers moving goods using a number of carriers rather than just one. GRI's are therefore much harder to pin down. Definitely a buyers market at the moment with the rates at their lowest since around 2011 when they had a bit of a dip. With the previous two months GRI's failing to materialise it will be interesting to see if the May one will stick with the added power of some blanked sailings being announced. I do wonder sometimes why the GRI's announced are always so high, when a gradual shift increase in rates might be a more workable solution?
Business owner Maritime Standard / Freight forwarding networking and networks / Data solutions for forwarders / Creating meaningful collaboration worldwide - adding value with data solutions to work smarter
9yI'd say there is definitely an element of this Jonathan, but also that shippers are just spreading their cargo across different alliances to avoid catching a cold. Reliability is becoming more of an issue, and shippers are making sure they have options. And they're of course also taking advantage of negotiating lower rates whilst they're shopping around.
Container Market Analyst at Braemar
9yI had a feeling this would happen. Asia-Europe liftings on a whole have been ok in Q1, Rotterdam and Antwerp ports reports strong TEU volume growth in Q1. It's just the evolution of the big ships developing more quickly than today's freight markets. I wonder if this collapse is an alliance effect, with shippers utilising more vessels as their containers ship on other alliance partners vessels. Perhaps some shippers are speaking to other partners lines of the alliance that their current shipper belongs to negotiate a rate cut by switching carriers. The goods still get shipped on same vessel and same ports, just the bill of lading will switch to another carrier resulting in a rate cut. One alliance effect could be "Easy Switch"