Spot rates crash on Asia-ECSA trade amid higher capacity

The volatile Asia-East Coast South America trade, which is one of the longest and costliest routes to service, saw spot container rates fall from $3,800 per TEU to $2,200 per TEU in just 11 weeks, according to SeaIntel Maritime Analysis.    Spot container rates on the Asia-East Coast South America trade have crashed over the last few months, fueled by carriers injecting more capacity onto the trade.
   In just 11 weeks, spot rates on the volatile Asia-ECSA trade, which is one of the longest and costliest trades to service, tumbled from $3,800 per TEU to $2,200 per TEU, SeaIntel Maritime Analysis reported Thursday.
   Back in April, weekly capacity on the trade lane reached a low point of 23,500 TEUs, and shortly thereafter, rates spiked to almost $4,000 per TEU.
   Since then, however, capacity on the trade lane has increased by 30 percent, primarily though the deployment of extra loader vessels, bringing spot rates back down.
   Overall, the trade has been subject to extreme swings in spot rates from 2012 onwards, SeaIntel said. At the height of the overcapacity period, spot rates dropped to as little as $99 per TEU in February 2016.
   “What will happen going forward depends on whether the carriers will cease their extra loader programs, although with the lag-time previously seen between capacity action and the SCFI on this trade lane, we might see the spot rates decline for a few more weeks even in the absence of further capacity injection,” said SeaIntel Maritime Analysis CEO Alan Murphy.
   And the Asia-East Coast South America trade is not the only lane that has experienced a decline in spot rates in recent months.
   The Shanghai Shipping Exchange’s Shanghai Containerized Freight Index (SCFI), which is based on spot rate estimates from Shanghai to 15 regions throughout the world, has also declined, falling from a reading of 918.83 at the end of June to a reading of 774.6 as of Sept. 15.
   The SCFI’s decline during this time period was driven by spot rate decreases on the Shanghai to North Europe and Mediterranean trades, which collectively hold a 30 percent weight on the index.
   However, rates from Shanghai to the U.S. West Coast have picked up over this time period, while rates from Shanghai to the U.S. East Coast have remained relatively unchanged.
   Despite the looming threat of overcapacity in the container industry, CMA CGM confirmed in its earnings release last week an order for up to nine containerships of 22,000 TEUs – six firm orders with an option for three more – slated for delivery from the end of 2019. China Daily reported last month the French carrier inked a letter of intent with two Chinese shipyards – Shanghai Waigaoqiao Shipbuilding Co. and Hudong Zhonghua Shipbuilding (Group) Co. – for the containerships.
   Meanwhile, multiple media outlets have reported that Mediterranean Shipping Co. (MSC) has placed an order for 11, 22,000-TEU containerships.
   “A significant number of 13,000-TEU and 14,000-TEU vessels will come off-hire in the coming years and the new order is expected to effectively replace this fleet, rather than substantially increasing MSC’s overall capacity,” an MSC spokesperson told maritime news outlet Splash 24/7 on Thursday.