Asia-Europe spot rate decline quickens – ‘the market has turned’

The steady decline of container spot freight rates between Asia and Europe turned decidedly steeper this week, with both the Asia-North Europe and Asia-Mediterranean trades witnessing double-digit declines.

Drewry’s World Container Index (WCI) saw its Shanghai-Rotterdam leg shed nearly $1,000 per 40ft this week, dropping 14% week on week, while Xeneta’s XSI Asia-Europe price fell 10%, to $6,843 per 40ft.

Meanwhile, the WCI Shanghai-Genoa leg saw spot rates decline 12%, to $5,842 per 40ft, while the Freightos Baltic Index Asia-Mediterranean leg was also down 12%, to $6,274 per 40ft.

“The market has turned, and we are seeing spot rates dropping quickly,” said one European forwarder.

The key problem for carriers is demand: despite all the extra capacity deployed via the Cape of Good Hope to cater for the extra sailing distances on Asia-Europe services, demand appears to have peaked, with the booking frenzy, and accompanying rate peaks of May and June, now little more than a recent memory.

Further evidence for this view came yesterday when Container Trade Statistics released its July figures, which showed monthly volumes beginning to decline.

According to CTS data, shipments from the Far East to Europe in July shed nearly 200,000 teu on the month before – dropping 0.5% from the 1.75m teu shipped in June, to 1.58m teu in July.

“I’d say with some certainty that the ‘peak’ was reached at the end of July on export volumes ex-Asia – which will only reflect in September/October arrival data at our end,” the forwarder continued.

And some parts of Asia showed an even greater decline: North Asia to North Europe volumes in July were down 7.6% month on month, and 14.2% year on year, while volumes from China to North Europe were down 3.9% month on month, although they remained 7.9% up on a year-on-year basis.

“We expect August data to show further drops month on month and demand in September looks weak. Blank sailing activity will ramp up as we approach Golden Week and is the only hope for carriers to slow the freefall in rates,” he added.

On Tuesday, THE Alliance member Hapag-Lloyd announced the grouping would blank five Asia-North Europe sailings in weeks 40 to 42, and three Asia-Mediterranean sailings in weeks 40 and 41.

Part of the problem for carriers is that the longer transit times via the Cape of Good Hope mean peak season cargo has to be loaded earlier in Asia to meet arrival windows, and this [the peak] is now coming to an end.

“For shipments to North Europe and the Mediterranean, the arrival window for this year’s peak season goods – taking into account longer transit times around the south of Africa and the upcoming Golden Week slowdown in China – is closing, removing some demand side pressure on rates,” said Freightos lead analyst Judah Levine.

“Prices to North Europe remain five times higher than in 2019, nonetheless; but relative to their July peaks, rates have now decreased,” he added.

Spot rates on the transpacific also weakened this week, albeit by a far lower degree – the WCI’s Shanghai-Los Angeles leg dropped 3%, to finish the week at $6,030 per 40ft, while the XSI transpacific index also dropped 3%, to $6,482 per 40ft.

It was a similar picture on the Asia-North America east coast trade, where the WCI’s Shanghai-New York leg saw pricing decline 2%, to $8,451 per 40ft.

Both declines on the Asia-North America trades came despite the looming threat of the dockers strike on the east and Gulf coasts, which had led analysts to forecast a surge in traffic, and thus spot rates, to west coast ports.

Neither appears to have happened – in fact, The Loadstar reported earlier this week that a nascent rate war seems to be breaking out on the eastbound transpacific trade, with a number of non-alliance carriers said to be “slashing rates” to improve utilisation and offering further indications of mounting overcapacity.