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Something Just Snapped: Container Freight Rates From Asia To Europe Crash 23% In One Week
Something Just Snapped: Container Freight Rates From Asia To Europe Crash 23% In One Week
One of the few silver linings surrounding the hard-landing Chinese economy in recent weeks has been the surprising resilience and strength of the Baltic Dry Index: even as Chinese commodity demand has cratered in 2015, this “index” has more than doubled in the past few months from all time lows, and at last check was hovering just over 1,100.
Many were wondering how it was possible that with accelerating deterioration across all Chinese asset classes, not to mention the bursting of various asset bubbles, could global shippers demand increasingly higher freight rates, an indication of either a tight transportation market or a jump in commodity demand, neither of which seemed credible.
We may have the answer.
It appears that the recent spike in shipping rates was analogous to the dead cat bounce in crude oil prices: a speculator-driven anticipation for a sustainable rebound that never took place. And now, just like with crude prices, it is all crashing down…. again.
According to Reuters, shipping freight rates for transporting containers from ports in Asia to Northern Europe dropped 22.8 per cent to $400 per 20-foot container (TEU) in the week ended last Friday, data from the Shanghai Containerized Freight Index showed.
Freight rates on the world’s busiest shipping route have tanked this year due to overcapacity in available vessels and sluggish demand for transported goods. Rates generally deemed profitable for shipping companies on the route are at about US$800-US$1,000 per TEU. In other words, at current prices shippers are losing half a dollar on every booked contractual dollar at current rates.
According to Shanghai data, it was the third consecutive week of falling freight rates on the world’s busiest route. Container freight rates have so far increased in 5 weeks this year but fallen in 23 weeks.
…click on the above link to read the rest of the article…
Shanghai Containerized Freight Index Totally Collapses, Top Carriers Wage Price War to Form Global Shipping Oligopoly
Shanghai Containerized Freight Index Totally Collapses, Top Carriers Wage Price War to Form Global Shipping Oligopoly
This is what two unnamed container shipping executives, one from an Asian carrier, the other from a European carrier, told the Wall Street Journal about the containerized-freight fiasco on the China-Europe route:
“We are now shipping at an absolute loss. With the bunker-adjustment-factor surcharge at $300 for Asia-Europe, we are losing more than $50 per box.”
“Unless by a miracle demand grows, we are up for heavy losses in the next quarter and maybe the rest of 2015.”
The rate for shipping a container on that route, after plunging for months, is now below even the cost of fuel.
The China Containerized Freight Index (CCFI), which covers spot market rates and contractual rates from Chinese ports to major destinations around the world, dropped another 1.2% last week, to a multi-year low of 851.4. The China-Europe component dropped 2.5%. The CCFI is now 21% below where it was in February, and 15% below where it was in 1998, when it was set at 1,000!
The Shanghai Containerized Freight Index (SCFI) paints an even drearier scenario. Unlike the CCFI, it is composed only of spot rates, not contractual rates, from Shanghai to the rest of the world. And this babe plunged 6.8% last week to 581.25, an all-time low, 42% below where it was during the Financial Crisis, on October 16, 2009, when it was set at 1,000, and down 47% from February.
This is what the four-month plunge looks like:
The Shanghai-Rotterdam sub-index plunged 14.4% last week to an all-time low of $243 per twenty-foot equivalent unit (TEU). Rates began to collapse in February. By April, when they’d crashed to around $400 per TEU, Drewry Maritime Researchestimated that the break-even rate for most carriers was $800 per TEU on that route. But now, the rates, at $243 per TEU, don’t even cover the cost of fuel of about $300 per TEU. Hence the screaming by the shipping execs!
…click on the above link to read the rest of the article…
