SCFI rises for first time in 2016

However, freight rates are still struggling and, according to shipping research and consulting firm Drewry, although consolidation may be a route to survival for some carriers, it can also create challenges.    The Shanghai Shipping Exchange’s Shanghai Containerized Freight Index (SCFI) posted its first increase in 2016, inching up 4.5 percent from last week’s reading of 400.43 to a reading of 418.47.
   The SCFI is an estimate of spot rates from Shanghai to 15 different regions throughout the world and is created by panelists from liner companies and shipping lines.
   However, the World Container Index (WCI) experienced a decline in its comprehensive index since last week, falling from $674.41 per FEU last Thursday to $666.27 per FEU yesterday. The WCI includes spot rates from 11 east-west container shipping routes and is jointly owned by Drewry and ClearTrade Exchange.
   The following routes measured by WCI posted declines yesterday compared to last Thursday:
     • Shanghai to Rotterdam: from $336 per FEU to $313 per FEU;
     • Shanghai to Los Angeles: from $844 per FEU to $795 per FEU;
     • Shanghai to New York: from $1,787 per FEU to $1,731 per FEU;
     • Los Angeles to Rotterdam: $2,623 per FEU to $2,598 per FEU;
     • Rotterdam to Los Angeles: $2,990 per FEU to $2,940 per FEU;
     • And Rotterdam to New York: $1,846 per FEU to $1,835 per FEU.
   On a brighter note, these routes measured by WCI experienced increases yesterday compared to last Thursday:
     • Rotterdam to Shanghai: $613 per FEU to $640 per FEU;
     • Genoa to Shanghai: $370 per FEU to $478 per FEU;
     • And Los Angeles to Shanghai: $402 per FEU to $457 per FEU.
   Meanwhile, rates on the Shanghai to Genoa route remained unchanged at $301 per FEU, while rates on the New York to Rotterdam route also remained the same at $485 per FEU.
   As a result of low freight rates, consolidation may be a route to survival for some carriers, Drewry said this week in its white paper, “Consolidation in the liner industry.” Drewry projects that liner financial results will deteriorate materially in 2016-17, increasing the likelihood of further industry consolidation.
   “Carriers with weak financials will be forced to address their cost structures in the absence of growth,” the shipping research and consulting firm said.
   NOL Group President and Chief Executive Ng Yat Chung acknowledged the current weakness in freight rates as a key driver in the company’s agreement to be acquired by French ocean carrier CMA CGM.
   In regards to the acquisition, CMA CGM Vice Chairman Rodolphe Saadé said, “With the outlook for the global container shipping industry remaining grim, joining forces is key to riding out the storm. Joining forces will enable us to grow [as] our industry faces new challenges. We believe that scale is more critical than ever to sustainable growth.”
   However, Drewry pointed to various challenges of carrier consolidation.
   “Cost saving benefits from consolidation can be rapidly eroded if the enlarged line is not able to keep the market shares and customers of the two constituent carriers,” it said. “This can be a major challenge, since customers may experience significant change in the service provided.”
   In addition, consolidation challenges can occur if the two lines are members of different alliances and vessel sharing agreements, Drewry said.