Shipping containers whacked by flagging demands

Freight rates are below levels post-1 March rate hikes even at this traditionally peak season.

According to CIMB, SCFI rates from Asia to North Europe fell another 7.7% wow or US$110/teu, falling a combined US$404/teu since the 1 August rate hike. Rates have now returned back to levels just after the 1 March hike.

CIMB said that the recent sharp fall is likely due to additional capacity deployed on the Asia-Europe (AE) trade lane as Evergreen and Hanjin Shipping started a new 9-ship loop since mid-August, with an average weekly capacity of about 9,160 teus. Unfortunately, CIMB noted that although the CKYH alliance had announced the suspension of one of their five AE loops, the removal of approximately 8,000 teus in weekly capacity will only be implemented from mid-October onwards. Similarly, the G6 Alliance will suspend Loop 3 temporarily, with its last sailing from Shanghai on 6 October. This leaves a two-month gap between the Evergreen/Hanjin capacity addition and the CKYH/G6 capacity deletion.

Here's more from CIMB:

Despite the current "peak shipping season", rates have faltered over the past two weeks and we could see rates stay under pressure until at least mid-October. 

More service suspensions need to happen before AE rates can stabilise, as the winter lull is coming quickly. Alphaliner estimates that at least five more AE loops (to North Europe and the Mediterranean) will have to withdrawn to bring slot utilisation rates to viable levels.

Over the past few months, slot utilisation for Asia-North Europe (A/NE) has hovered at 80-85% only.

Nevertheless, the transpacific (TP) trade seems to be holding up better, although rates to the US West Coast (USWC) declined 3.2% wow or US$83/feu.  Higher slot utilisation was probably the key, averaging about 90% over the past several months.

It was reported that ports along the US East Coast and Gulf of Mexico could face a possible shutdown on 1 October due to the deadlock in negotiations between port employers and the unions. With no sign that the matter will be resolved anytime soon, carriers serving these regions could experience disruption to their services that could affect their financial performance.

During last week‟s analysts‟ briefing, CSCL said that its clients were making inquiries about possible contingency plans, but were not yet pressing the panic button. 

CSCL does not believe that the disruption, if it happens, will drag out over an extended period.