Ocean freight spot rates drop to new yearly lows

12/24/2017

The China Containerised Freight Index (CCFI) and Shanghai Containerised Freight Index (SCFI) both fell to new yearly lows last week, with transpacific freight rates under the most pressure.

And after hitting 12-month lows last week, transpacific freight rates could plunge further in 2018, according to Alphaliner. Spot rates from China to the US West Coast dropped to just $1,078 per feu, compared to a peak of $2,211 per feu in January, while rates to the US East Coast plummeted to $1,804 per feu, down a peak of $3,647 per feu in January.

According to Alphaliner, continued rate weakness should be expected on the headhaul trade next year as more capacity enters the market.

“Rates could weaken further and fall below the key levels of $1,000/feu to the West Coast and $1,600 per feu to the East Coast, with significant uncertainty over the course that transpacific rates could take over the coming months,” said the analyst.

The inability of lines to exercise supply-side discipline has been a feature of the transpacific market during 2017. For example, Transpacific Stabilization Agreement (TSA) carriers have made up to 18 attempts to impose GRIs ranging from $400 to $1,000 per feu this year, but none of the initiatives found traction

“Numerous attempts to implement General Rate Increases, both by member carriers and non-members of TSA have already failed this year and Maersk’s decision to withdraw from the TSA in December could further de-stabilise the trade,” said Alphaliner, which speculated that the line’s frustration at the lack of GRI success may have prompted its departure.

“[Maersk’s] resignation is the latest in the series of recent departures from the transpacific discussion group, that has already been weakened by the resignation of several members − K Line, NYK and Zim − as well as by the exits of Hanjin Shipping and CSCL in 2016,” said the analyst.

“Maersk’s departure will leave the TSA carriers’ share of the transpacific trade at only 65%, compared to a peak of over 80% in the past.

“With significant capacity expansion planned in the Far East-North America trade in May next year, the TSA’s weakened membership position could lead to further rate volatility in 2018.”