Asia-Europe Boxship Rates at Their Lowest Yet, Likely to Continue Falling

Freight rates on the Asia to Europe route have dropped to their lowest levels on record as carriers face off in a damaging rate war amidst weak vessel utilisation, according to shipping analyst Alphaliner.

The Shanghai Containerized Freight Index (SCFI) spot rates from Shanghai to North Europe reached an all-time low of USD 243/teu on 12 June and could fall further with rates as low as USD 150/ teu reportedly offered by carriers.

Current spot rates are well below breakeven levels, estimated at about USD 800/teu based on Alphaliner’s calculations.

Effective freight rates, after deducting fuel surcharges, are now negative for carriers with BAF (bunker adjustment factor) averaging USD 337/teu in June.

“Although carriers have announced another round of general rate increases (GRI) ranging from USD 900 to USD 1,200 per teu on 1 July, any gains are likely to be short lived if not accompanied by effective capacity rationalisation measures. The widespread practice of void sailings has proven to be ineffective so far,” said Alphaliner.

It’s the additional capacity that is hurting freight rates,” ACM container analyst Jonathan Roach told the Wall Street Journal. “Demand for container shipping grew a less-than-expected 3% in the first four months of the year, so it will be a very challenging environment that could test the carriers over the next two to three years.”

As a result of the capacity oversupply, estimated to reach 35% by the end of the year, carriers are likely to experience losses in the second quarter of the year.

Alphaliner’s data shows that carriers have cancelled 52 voyages or 10% of all Far East to North Europe sailings during the first six months of this year, the highest rate of sailing cancellations ever recorded on the trade.

Despite this, carriers’ reluctance to permanently withdraw excess capacity have foiled all of their previous rate restoration efforts. As an alternative to void sailings, Maersk and MSC have announced a reduction in capacity on one of their six FE-North Europe strings.

However, Alphaliner believes that the minor capacity reduction is unlikely to have an impact as it will only remove 1% of the total FE-North Europe trade capacity.

Image: Port of Hamburg

Share this article

Follow World Maritime News

In Depth>

Events>

<< Apr 2019 >>
MTWTFSS
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 1 2 3 4 5

GreenTech in Shipping USA Forum 2019

GreenTech in Shipping USA Forum is an event for Maritime leaders who want to unlock successful business formula of the industry!

read more >

CWC World Gas & Power Series – Brazil & the Americas Summit

CWC World Gas & Power Series: Brazil & the Americas Summit is the perfect meeting place to make contacts…

read more >

FPSO Brazil Congress 2019

Charging ahead with 24 planned orders by 2022, Brazil has once again solidified its status as one of the world’s foremost oil and gas leaders…

read more >

Nor-Shipping 2019

Nor-Shipping’s conference and event programme is tailored to deliver the knowledge, value and networking to help you build your business.

read more >