Drewry: Spot Rates to Nosedive after Chinese New Year

Image Courtesy: Port of Rotterdam

Container spot rates are likely to fall sharply after Chinese New Year, but will strengthen thereafter, according to shipping consultancy Drewry.

The consultancy said that carriers are in for fairly steep price reductions immediately after CNY as its World Container Index (WCI) is expected to be on a par with 2016 (year of the Monkey), when after a reasonable pre-CNY boost of 24%, rates crashed by 41% afterwards.

Spot prices on the key East-West corridors have usually increased during the lead up to Chinese New Year (CNY), which lands in and around the end of January/mid-February.

As of February 8 the composite benchmark rate for the WCI that covers eight major East-West trades, was USD 1,512 per 40ft container, a rise of 25% on the year-end 2017 figure six weeks prior. Similar increases were seen in both of the previous two years’ six-weeks out from CNY.

While there is a lot of potential new tonnage due in 2018 (some 2 million TEU after slippage from last year), the carriers are expected to suppress their impact with more deferrals, scrapping and if necessary by reactivating the idle fleet, which is now below 2%.

Moreover, void sailings will remain a key part of the arsenal to prevent trade load factors falling precipitously in any given month.

Last year brought some respite for carriers as the pre-CNY gains exceeded the post-CNY lull, which meant that the prevailing rates six weeks after CNY was around USD 100 higher than it had been six weeks prior to the festivities, giving a reasonably stable platform for contract negotiations.

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