Capacity cuts could help implementation of planned rate hikes
February 20, 2012
Scepticism over container lines’ freight rate hikes persists, although Maersk’s announcement on Friday that it is to reduce its Asia-Europe capacity by 9% could help GRIs gain traction.
With market fundamentals relatively unchanged, forward indicators of freight prices are rising, say freight rate brokers, but not by as much as the box lines might hope.
Rounding up last week’s activity in the forward container rate market, derivative broker Cherry Wang said: “Many believe the 1 March rate increases to be opportunistic, but current freight rates are unsustainable.
“Even if the carriers managed to get part of the $750 per teu surcharge through, just how long it would stick will be the key question.”
She pointed to a weak freight rate environment, ailing global economy and strike actions sweeping Europe as factors contributing to the box lines’ woes.
A harbour pilot strike over pension rights at the port of Antwerp finally ended last week after four days, but left 80 ships in limbo and cost port authorities $1.3m hourly. That disruption followed recent strikes at Rotterdam when dockers at APM Terminals’ facility staged a walk out over new labour contracts.
Also commenting on last week’s forward freight prices, Clarkson broker Ben Gibson said: “Forward curve progression was a little less certain, as other routes pushed strongly to catch up with Asia-Europe, but the SCFI-Europe route saw increased selling interest check the rise.”
He said bids from shippers of over $1,000 per teu in Q2 seemed to be tempting the lines into selling.
“Much has been said about whether this points to a less than 100% traction rate for GRIs,” said Gibson, “and information from the physical market is varied as to whether carriers have done enough to tighten the balance in their favour.”
Recent data from Container Trade Statistics shows that European imports contracted by 0.6% in Q4 2011, the first contraction since Q3 2009.
With more capacity coming onto the Asia–Europe trade lane and a fragile forecasted demand growth, carriers will be going head to head trying to fill their vessels, although this is likely to be offset to some degree by Maersk’s 9% reduction in capacity, reported today in IFW.
There are mounting signs that the Eurozone may be heading towards a recession in 2012, as GDP data released last week showed that its economy shrank by 0.3% in Q4 2011. Germany reported a 0.2% fall in GDP for Q4, which was a small contraction compared to the 7% decline in GDP in Greece.
Amid these disappointing economic numbers, and Maersk’s assertions that it will aggressively defend market share despite cutting capacity, the freight rate wind seems to be blowing in shippers’ favour, and could yet lead to a less orderly capacity cut among the other lines – not necessarily a favourable outcome for their customers.
Courtesy of IFW
