Lines can win the rate war say freight brokers
February 13, 2012
Container lines’ attempts to raise prices on the Asia-Europe and transpacific trades stand a good chance of success, according to freight derivative brokers at Clarkson Securities.
Forward freight prices on the Asia-US west coast trade finished last week strongly after buyers were caught unawares by the Transpacific Stabilisation Agreement (TSA) proposal to raise prices, said broker Ben Gibson.
The TSA has called for an immediate $300 per teu rise, followed by a suggested further increase of $500 for next year’s contracts, while carriers on the Asia-Europe trade are attempting to almost double rates.
Gibson says pricing power appears to be shifting towards the carriers, following recent outcry from shippers over the rate hikes.
“All the PR heat is on the mainline general rate increases (GRIs), but it appears to us that the balance in the market is shifting towards the carriers,” said Gibson.
“When the Asia-Europe GRI was announced, most of the shippers thought it was a joke. Two weeks later, people we talk to are a bit more cagey.
“There is cargo moving post-Chinese New Year and the carriers have maintained tightness in capacity. All these little things are starting to suggest that the carriers have a better shot at achieving the rate increases.”
The fact that the US west coast route, with its stronger contract structure, sustained a GRI better than Asia-Europe during 2011 led to the significant hike in last week’s forward freight values, he added.
The increased rates also seem to be providing relief to the container lines’ share prices, many of which have rallied since the rate restoration.
Clarkson analysts have warned, however, that any big losses revealed in the current round of full-year results would make share price recovery strongly dependent on successful implementation of higher rates and “capacity discipline”.
February data indicates that a total of 11 containerships of a combined 73,865teu were delivered in January 2012, including four vessels each with a capacity in the region of 13,000teu.
“The Shanghai Container Freight Index (SCFI) is continuing to stay steady, and that will be in the carriers’ favour as we move towards 1 March,” said Gibson. “Although if we see a drop this week, that story could change.”
Courtesy of IFW
