Spot container rates continue to tumble

Rates from Shanghai to North America, Europe, and Mediterranean fell again this week.    Spot container freight rates have continued to fall during the past week, according to the estimate published each Friday by the Shanghai Shipping Exchange.
   Panelists said the spot rate from Shanghai to ports in Northwest Europe was down $41 to $243 per TEU; to the Mediterranean down $67 to $312 per TEU; to the U.S. West Coast, down $106 to $1,341 per 40-foot container (FEU); and to the U.S. East Coast down $112 to $3,004 per FEU.
   The overall Shanghai Containerized Freight Index, which includes spot rate estimates from Shanghai to a total of 15 regions around the world fell to 581.25 from 623.47 a week earlier.
   The underlying SCFI rates are estimated by a panel of 15 ocean carriers and 17 forwarders and shippers, and they include surcharges for bunkers, currency, canal fees, etc.
   “Rates are now a whopping 80 percent lower than the corresponding period a year earlier, further highlighting the horrendous erosion seen since early this year,” said Richard Ward, a derivatives container derivatives broker at Freight Investor Services in London.
   “Rates have now been under the psychological $1,000/TEU mark for 16 weeks, the longest time this has occurred since the so-called ‘rate war’ witnessed at the back end of 2011.”
   Much of the drop in rates “can still be attributed to the fall in bunker prices, which are 40 percent lower than the corresponding period a year earlier,” said Ward, but he noted that in the same time period freight rates from Asia to North Europe trade “have fallen by 80 percent, suggesting carriers have given back more than the savings acquired from the fall in costs.”
   He also noted even though fuel prices are still much lower than they were a year ago, they have been on the rise in the first half of 2015.
   Drewry made the same observation in its Container Insight Weekly newsletter this week, saying “as freight rates continue to fall, bunker costs are creeping upwards. After two months of the second quarter the World Container Index is averaging 28 percent lower than it was for the first quarter, whereas IFO 380 in Rotterdam has increased by 15 percent.”
   While cargo volumes will pick up in the second and third quarter peak season Drewry said “the number of newbuild ships that are scheduled to be delivered from June onwards will weigh heavy on the supply-demand balance.
   “Pressure to fill those new ships and maintain market share will continue to suppress freight rates through the remainder of the year,” added Drewry. “With costs now rising the chances of carriers beating their first quarter performance seems remote.”
   However, several carriers have announced plans for hefty rate increases on July 1.
   The Transpacific Stabilization Agreement, whose 15 members carry over 90 percent of containerized cargo from Asia to the U.S., in May recommended both a $600 per FEU general rates increase and a peak season surcharge of $400 per FEU to take effect July 1. Whether that will be effective is unclear — the TSA had also suggested a $600 per FEU hike on June 1 and the SCFI rate has nonetheless continued falling.
   Similarly, Maersk had announced an GRI in May to take effect June 1 of $800 per TEU, while spot rates according to the SCFI have continued to decline.