Shipping rate hikes sink to near-impossibility

Carriers have postponed rate hikes as bookings fizzled and the near-term horizon show no signs of calmer waters.

Utilisation rate is too weak to support additional surcharges, such as the one planned on June 10, according to CIMB, and shipping carriers who do manage to implement the rate hike will find it difficult to stick.

Here's more from CIMB:

The container shipping industry suffered its second blow in the space of one month with the proposed 1 June AE rate increase failing, following the failure of the 1 May TP hike. The market is likely to be sceptical of the success of further rate hikes.

Contrary to the proposed rate hike of US$240-400/teu on 1 June, freight rates on the Asia-Europe trade weakened again. The SCFI North Europe fell US$45/teu (-2.6% wow) and SCFI Mediterranean US$34/teu (-1.8% wow). It appears that discipline is waning and the supply of ships is growing as idle ships continue to disappear. Maersk Line and Hapag-Lloyd are among a number of leading global carriers that have decided to postpone a peak season surcharge to two weeks later (15 June). Maersk said it has not seen the usual seasonal pick-up in bookings expected at this time of year. We think carriers may find it difficult to impose full surcharges as capacity utilisation is hovering at just 85% and more concerted efforts by the carriers are required to keep ship supply in check.

On the Transpacific route, rates weakened as well, albeit by a smaller quantum, at just -0.3% wow for the USWC and -0.9% wow for USEC. Lloyd’s List reported that carriers resisted any rate-cutting in advance of the June peak season surcharges recommended by the Transpacific Stabilization Agreement. The TSA members are recommending a peak-season surcharge of US$600 per feu and proportionate levels for other equipment sizes, which will take effect on 10 June. The average utilisation rate on this trade is holding up at 90% but does not look strong enough to enable carriers to pass through the PSS on 10 June. We expect only partial and short-lived success, if any, in passing through this PSS, i.e. from late-June or early-July, lasting for perhaps 4-6 weeks.