Rates on the Asia-Europe and Med trades have remained above last year’s levels since January. Photo credit: Shutterstock.com.
Spot rates on trades from China to Europe and the Mediterranean continue to track well above levels recorded last year as carriers match the sharp decrease in demand with equally severe cuts in container shipping capacity.
The rate from Shanghai to Northern Europe rose 4.4 percent sequentially this week to $863 per TEU, almost 11 percent higher than the same week last year, according to the Shanghai Containerized Freight Index (SCFI). The Shanghai-North Europe rate has only fallen below 2019 levels twice since the start of the year, despite Asia-North Europe volumes declining 12 percent in the first quarter of 2020, according to data from Container Trade Statistics. Weekly rate movements of the SCFI are tracked by the JOC Shipping & Logistics Pricing Hub.
From China to the Mediterranean, the SCFI rate rose 5.1 percent to $924 per TEU this week, up 25 percent compared with the same week last year. It is the highest comparative weekly percentage so far during a year when the year-over-year increases have been in the double digits since December 2019.
How the rates will perform into the third quarter remains an open question. With COVID-19 lockdowns lifting across Europe, carriers are shifting their attention to the third quarter, the traditional peak shipping season, taking tentative steps to restore capacity in line with expected demand. However, this is being seen more as carriers having overestimated the demand decline and making slight adjustments to match volume, rather than evidence of a recovery.
Little optimism for third quarter
Carriers have not yet announced any blank sailings for the third quarter, although Sea-Intelligence Maritime Consulting pointed out in its latest newsletter that bookings are usually made four to five weeks before loading, so carriers will soon be able to gauge demand. But the analyst was not optimistic.
“With the global economy still in disarray, mass layoffs of consumers continuing, and European economies only tentatively beginning to open, it seems extremely unrealistic to expect booking uptake to revert to normal in the next week or two,” said Alan Murphy, CEO of Sea-Intelligence. “As carriers do what they can to protect rate levels, and hence profitability, the glass remains half-empty, and shippers and ports need to prepare for another raft of blank sailings in the coming weeks.”
So far, 92 sailings have been canceled on Asia-Europe and Asia-Med since March 13, which can be directly attributed to the drop in volume caused by Europe’s lockdown measures to combat the coronavirus disease 2019 (COVID-19), according to Sea-Intelligence. By mid-May, the capacity withdrawn on the Asia-North Europe trade peaked at 25 percent, while cuts on Asia-Mediterranean routes reached 30 percent.
The restricting of capacity has been combined with some carriers announcing freight all kinds (FAK) increases on Asia-Europe and Asia-Med routes. From June 1, CMA CGM will charge FAK rates of $1,050 per TEU on Asia-North Europe, and $1,100 on Asia-West Med. Hapag-Lloyd’s FAK rate is $975 on Asia-North Europe, and $1,085 per TEU on Asia-West Med, while Zim’s is $1,167 from Shanghai to Haifa in the East Med.
Contact Greg Knowler at [email protected] and follow him on Twitter: @greg_knowler.
