By Ben Meyer / www.americanshipper.com / August 13th, 2018
Both of the primary indices show spot container freight rates are up from last year.
Container freight rates showed continuing strength last week as increased seasonal demand collided with diminished capacity and emergency bunker fuel surcharges in the major east-west trade lanes, according to two of the primary indices for measuring spot market pricing.
The Shanghai Shipping Exchange’s composite Shanghai Containerized Freight Index, which aggregates spot rates on 13 different outbound trades from Shanghai, grew another 0.3 percent on a sequential basis last week following increases of 3.1 percent and 8.8 percent the previous two weeks.
Despite the week-to-week growth, however, it wasn’t until last Friday that the SCFI turned positive on a year-over-year basis, rising 1.8 percent to a reading of 893.88, compared with the index’s reading of 878.27 as of Aug. 11, 2017.
On an individual trade lane basis, spot rates as measured by the SCFI from Shanghai to Europe grew 1.4 percent last week, from $935 per TEU to $948 per TEU, while rates from Shanghai to the Mediterranean climbed 1.6 percent, from $881 per TEU to $895 per TEU.
Growth in transpacific pricing plateaued after two weeks of strong growth, with rates from Shanghai to the U.S. West Coast slipping 0.3 percent, from $2,074 per FEU to $2,068 per FEU, while rates to the U.S. East Coast ticked up less than 0.1 percent, from $3,099 per FEU to $3,102 per FEU.
The World Container Index, produced by London-based maritime shipping consultant Drewry, also was relatively steady, slipping just 0.3 percent the previous week but rising another 7.9 percent year-over-year to $1,691.88 per FEU.
Year-over-year growth in the composite WCI had been weighed down in previous weeks by large drops in rates for backhaul Asia-Europe and transpacific routes. As noted here previously, one of the primary differences between the SCFI and WCI indices is that the WCI includes backhaul trades — i.e. from Europe to Asia and North America to Asia — while the SCFI measures outbound rates only.
According to Drewry, westbound rates from Shanghai to Rotterdam slipped 0.4 percent on a sequential basis to $1,776 per FEU last week but were still up 8 percent compared with the same 2017 period. By comparison, eastbound pricing from Rotterdam back to Shanghai was down another 3 percent sequentially and 38 percent year-over-year to $795 per FEU as of the end of last week.
Spot rates from Shanghai to Genoa were unchanged from the previous week as well as compared with the same period a year ago at $1,677 per FEU.
In the transpacific, eastbound WCI rates from Shanghai to Los Angeles also were unchanged from the previous week after skyrocketing 30 percent two weeks ago to $2,151 per FEU. As a result, Shanghai-L.A. pricing is now 30 percent higher than at this point last year. Even backhaul rates outbound from L.A. fared better than in previous weeks, climbing 2 percent both sequentially and year-over-year to $489 per FEU.
Rates to New York showed a similar pattern, slipping 0.3 percent week-over-week after an 18 percent sequential jump the previous week, leaving them 20 percent higher than during the same 2017 period at $3,202 per FEU.
Likewise, transatlantic pricing fell 0.8 percent sequentially, but rose 13 percent year-over-year to $1,950 per FEU.
In its weekly analysis, Drewry noted that the average composite WCI so far this year now stands at $1,404 per FEU, down 7.8 percent from the index’s five-year average of $1,523 per FEU.
Drewry said it expects rates to “remain stable” next week, adding that it expects pricing to continue to trend upward in the second half thanks to a much more stable market than in recent years.
“An absence of huge swings in weekly east-west container freight rates suggest the market is stabilizing,” the firm said in the latest edition of its Container Insight Weekly newsletter. “Container spot rates on the main east-west trading corridor have been on a steep incline over the past 16 weeks, with Drewry’s World Container Index (WCI), a composite of weekly container freight rates on eight major routes to and from the US, Europe and Asia, rising by around $500 per 40-foot container since mid-April.”
The surge in spot market pricing in some ways represents the industry’s last real chance to salvage a profitable 2018 after most of the top carriers posted losses in the first half of the year.
Danish conglomerate A.P. Møller - Maersk A/S, parent of leading container carrier Maersk Line, last week became the latest shipping company to lower its full-year financial expectations, citing headwinds from higher bunker prices and volatile spot rates in the early part of the year. The earnings downgrade followed similar announcements from Germany’s Hapag-Lloyd and NYK of Japan.
“The price inflation of the past four months or so has finally taken the WCI above where it stood last year, bringing relief to embattled carriers,” said Drewry. “Perhaps key to the future direction of travel is the fact that in the most recent weeks the index has finally broken free from following last year’s trend.
“The introduction of emergency fuel surcharges and a more proactive attitude by carriers towards capacity management should mean that the trend for following the trend is over. From a carrier perspective it is vital that the pattern is broken as east-west spot rates fell precipitously in the second half of last year and a repeat performance would deepen the losses.”
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