Shanghai-Europe rates jump, Shanghai-US falls

7/21/2012

The Shanghai Containerized Freight Index (SCFI) showed a 22% jump in spot rates to Northern Europe last week and a 12% rise in rates to the Mediterranean. US rates fell.

An overall rise in the benchmark index was expected in some quarters, given the container lines’ previously announced Asia-Europe General Rate Increases (GRIs), but Friday’s results followed almost two months of faltering in the carriers’ attempts to restore rates to profitable levels.

Spot rates between Shanghai and the US, meanwhile, dropped markedly as carriers’ efforts to impose a Peak Season Surcharge (PSS) seemed to be eroded.

Commenting on Friday’s Resultses, ACM GFI Freight rate derivatives broker, Cherry Wang, said falling export orders from China suggest that European consumer demand is softening further.

“Peak Season Surcharges originally announced at an average rate of $350 per teu for June were withdrawn in favour of July GRIs of around $500 per teu. It was obvious that the peak volumes were still a long way off, however Maersk Line stuck to their announced mid-July PSS of $350 per teu and were seemingly successful in implementing it.

“The upshot? We’ve heard rumours in the market that carriers have been mitigating their original GRI levels to around the $350 mark. This suggests that Maersk have set the benchmark, and is certainly mirrored in the SCFI this week.

“Whether by hook (PSS) or by crook (GRI) it seems that carriers are still determined to push increases through – however one wonders how quickly the increases will erode if the volume doesn’t start to pick up significantly.”

Clarkson Securities Broker, Ben Gibson, said the jump in rates had caused some lines to pull back from offering index-linked contracts in Q3 and that this had left some frustrated shippers.

“Interestingly, however, offers remain at historically high discounts to spot for Q4 in a reflection of the disconnect between GRIs and weak fundamental sentiment,” he said.

Gibson added: “The transpacific market continues to ebb as spot rates slowly shed the PSS that was added on June 10th. The TSA carriers are yet to announce any further surcharges and the signal from the forward market is lightly bearish.”