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Asia-Europe spot rate rebound foreshadows more volatility    12/05/2018
Asia-North Europe spot rates have risen 28 percent in the past three weeks, firmly reversing a downward trend that began immediately after the Lunar New Year pulled prices down to a level not seen in more than a year and foreshadowing more volatility ahead.

Port of Shanghai Hangshan.

It is becoming apparent that the volatile spot rates that have characterized the Asia-Europe trade for as long as anyone can remember are not going to disappear, even though the carriers enjoyed a profitable 2017. (Above: the Port of Shanghai Yangshan.) Photo credit: Shutterstock.com.

It is becoming apparent that the volatile spot rates that have characterized the Asia-Europe trade for as long as anyone can remember are not going to disappear, even though the carriers enjoyed a profitable 2017. Following six straight years of losses, the container shipping industry ended 2017 with a total profit of roughly $7 billion,according to Drewry.

The rate of $811 per TEU was $227 per box higher than it was in the third week of April, according to the latest reading of the Shanghai Shipping Exchange’s SCFI. The weekly rate movements are recorded at the JOC Shipping and Logistics Pricing Hub.

However, it also came with a year-over-year decline in Asia-Europe container volume in March, with data from Container Trades Statistics showing that Europe import volume from Asia fell by 14.5 percent.

Any year-over-year comparison is distorted by the late Lunar New Year, but when taken over the full first quarter, container volume was up 1 percent compared to the first three months of 2017. Asia-Mediterranean spot rates rose 23 percent in the past week to $783 per TEU, the third week of increases on the trade, the SCFI showed.

Alphaliner: rapid fleet growth continues to pressure freight rates

Alphaliner said the active global fleet (total fleet minus idle capacity) currently stood at 21.43 million TEU, representing a growth of 8.2 percent compared to a year ago, with the rapid pace of capacity growth continuing to pressure freight rates.

The analyst said although spot freight rates from China have shown some strength, even as the SCFI has gained compared to a month ago,the CCFI dropped by 2 percent over the same period. This divergence in the SCFI and CCFI suggested carriers have not been able to raise their average freight revenue despite the spot freight gains, Alphaliner said.

Demand for containerized volume in the Asia-Europe trade will grow by 3.7 percent for the year, actually declining slightly compared with 2017, before growing at about the same pace in 2019, according to IHS Markit’s Trends in the World Economy and Trade forecast.

Container ship capacity in Asia-Europe trades in the second quarter is projected to be well ahead of demand that will need to grow a lot more than the forecast 4 percent this year to absorb the new tonnage floating into service. The capacity scheduled to be deployed on the Asia-North Europe route in the second quarter will grow 8.8 percent year over year, while Asia-Mediterranean capacity will rise 6.5 percent, according to data from SeaIntel Maritime Analysis.

SeaIntel CEO Alan Murphy said a belief that 2018 was off to a strong start  was being upset by the almost 15 percent decline in head haul trades on Asia-Europe in March. He pointed out that backhaul trades grew by 2.9 percent in March but cautioned against reading too much into the numbers.

“It should be noted that such a sharp reversal in demand growth on key trades should call on a bit of caution in terms of interpretation,” he said. “We do not yet know whether this is simply an aberration, and hence the market is exhibiting a higher degree of volatility on an otherwise firm basis, or whether this is a reversal of trend. For this we would need to await the data for April and May.”

 




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