The uplifting effect on spot freight rates from the pre-Chinese New Year cargo rush was short-lived, as pricing on the key East-West trades slunk backward in February 2014, according to the latest Drewry Container Freight Rate Insight.
Data from Container Trades Statistics (CTS) revealed that westbound cargo from Asia to North Europe surged by 8.1 percent year-on-year in January as shippers looked to secure space for their goods ahead of the Chinese factory closures and scheduled blank voyages advertised by carriers for February. The demand rush was too much for carriers to handle. Notwithstanding the latent capacity withheld by slow-steaming, there was insufficient available space for the extra cargo, leading to cargo roll-overs and higher spot market freight rates for shippers.
Drewry estimates that average westbound Asia-North Europe ship utilization for January was 108 percent, enough to lift rates to an 18-month peak of $3,370 per 40-foot container. However, the pendulum is swinging back towards shippers as despite February’s missed sailing program -- reducing available capacity in the trade by an estimated 5 percent -- weaker post-CNY demand has forced carriers to once again undercut one another to fill their ships.
Drewry’s benchmark Shanghai-Rotterdam spot rate for February slipped 9 percent to $2,960/feu, wiping out gains from December’s GRI. Meanwhile, weekly data from the World Container Index indicates that the pricing erosion has continued into March. From around mid-2013, Asia-Europe spot rates started moving according to supply and demand once again, whereas previous price fluctuations were less to do with market fundamentals and were more driven by carriers’ desperation. Shipping lines were able to generate temporary success from big GRIs by pleading poverty, but they quickly petered out without anything more substantial behind them.
Carriers will struggle to push through hefty GRIs, such is the extent of the supply side pressures they are facing. Shippers should expect carriers to continue to fight the tide by withdrawing voyages in months when demand is expected to be low. But with so many large ships arriving this year, it will not be enough to force significant rate hikes.