Freight Rate War Engulfs Asia-Europe asTranspacific Rally Vanishes

By Gavin van Marle (The Loadstar) –

With spot rates on Asia-Europe shipments now being discounted on an almost daily basis, freight buyers on the trades fear that a new freight rate war may now be fully underway.

Earlier this week, The Loadstar reported that despite the fact that some 500,000 teu in proforma capacity is effectively missing from the Asia-North Europe and Asia-Mediterranean routes, spot rates have been in continual decline for almost three months – Alphaliner calculated that of the 461 ships needed to fully staff all 31 Asia-Europe strings, only 425 are presently deployed, leading it to conclude: “This clearly hits at a rate war between some of the major carriers.”

This week saw another round of double-digit pricing declines on the major spot rate indices.

One European freight forwarder told The Loadstar: “It already looks like a rate war is underway, we’re getting daily updates now with revised lower rates, the blanks and vessel adjustments so far appear to be having little or no effect on the rate erosion.”

Drewry’s World Container Index (WCI) saw an 11% week-on-week drop on the Shanghai-Rotterdam leg, dropping below the $2,000 per 40ft mar for the first time in well over a year to end at $1,910 per 40ft.

The WCI’s Shanghai-Genoa leg declined 9% on the previous week to end $2,131 per 40ft.

The crowd-sourced Xeneta platform recorded average spot rates into North Europe having declined 22.5% since the beginning of September, and down 14% into the Mediterranean in the same period.

“The decline in average spot rates has been much harder into North Europe compared to Mediterranean, but that could change in the coming weeks,” said Xeneta chief analyst Peter Sand.

“Rolling weekly average capacity on the trade into Mediterranean is set to increase to 208,000 teu by the end of the month while remaining fairly steady into North Europe.

“This could see the pace of spot rate decline quicken into Mediterranean and a narrowing spread with rates into North Europe,” he added.

However, sources also suggested that there could be some growth in the market following the post-Golden Week slack season.

“We expect [the freight rates declines] to continue post-Golden Week, but I don’t see the decline lasting to the end of the year – I would expect some bounce back and we expect demand to pick up at some point before the end of the year,” the forwarder added.

Meanwhile, the recent spot freight rate rally on the transpacific appears to have vanished, with mid-month general rate increases of between $1,000 and $3,000 per 40ft, depending on carrier, having little effect on pricing.

The WCI’s Shanghai-Los Angeles leg declined 4% week-on-week to finish at $2,561 per 40ft, while the Shanghai-New York leg dropped 5% to $3,571 per 40ft.

However, the transpacific declines on today’s Shanghai Containersied Freight Index (SCFI) were of a far higher magnitude and suggest the WCI could see steeper falls next week, as it often lags the SCFI by a few days.

The SCFI’s Shanghai-US west coast base port leg lost 31% week-on-week to end at $1,636 per 40ft, while the Shanghai-US east coast base port leg lost 23% to finish $2,557 per 40ft, with both movements effectively wiping out the gains from the first half of September.

However, in a slight divergence, the XSI shows average transpacific rates holding steady over the past week, while the FBX index powered by Freightos saw single-digit rate increases on both transpacific trades.

However, Mr Sand suggested it would be unlikely to persist.

“The sharp spot rate spike on the Transpacific at the start of September was a surprise to many and we see another uptick mid-month. Shippers will be wondering what on earth is driving this increase when the expectation was for further softening in freight rates.

“If shippers are prepared to call the carriers’ bluff, we will see the mid-month increases fall away pretty quickly with softening spot rates for the remainder of the month,” he said.

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