Asia-europe route price war is intensifying?
After the end of the Spring Festival holiday, the industry resumed work successively, and the spot freight rate of most major transactions fell continuously. Shanghai export container freight index (SCFI) fell 7.3% in the latest period, down to 1896.65 points, the ocean route freight continued to decline, the composite index continued to fall.
· For European routes, the transport market is generally in a recovery trend, and the transport demand is flat. Most shipping companies take measures to temporarily suspend flights and combine flights to balance supply and demand, and the booking price in the spot market continues to decline. The China-Northern Europe and China-Mediterranean routes fell 16 per cent and 5 per cent respectively last week.
· North American routes, the transport market performance is relatively weak, the growth of transport demand is weak, and the market freight rate continues to show adjustment; South American route, the lack of further growth of market transportation demand after the holiday, the balance of supply and demand is not ideal, and the market freight rate continues to fall this week. Both West and East Coast routes fell 5 per cent last week.
· Persian Gulf route, after the holiday market recovery is slow, the transport demand performance is weak, the spot market booking price continues to fall this week.
· On the Australia-New Zealand route, the transport demand was at a low level after the long holiday, and the supply and demand fundamentals lacked support, and the market freight rate fell sharply.
Drury's World Container Index (WCI) Shanghai-Rotterdam route fell 5% to close at $3,125 per 40 feet, down about 29% year on year, while Shanghai-Genoa route fell 4% to close at $4,236 per 40 feet, down 19% year on year. The price falls on both routes come amid reports of an intensifying price war between Asia and Europe.
Anne Sophie Fribourg, vice president of global shipping at UK-based digital freight forwarding company Zencargo, said: "There are no real restrictions in terms of shipping space. I've seen some carriers offer some very low rates on a prepaid basis. I don't know if it's psychological, but the cheapest spot rates are the Gemini carriers - maybe they expect weak demand, but their quotes are about 20 per cent lower than other carriers."
Meanwhile, WCI rates from Shanghai to Los Angeles and Shanghai to New York both fell 1% week over week to $4,717 and $6,212 per 40 feet, respectively.
Unsolicited offers received from Chinese freight forwarders show spot rates far below that, with one offering $2,300 per 40 feet for a Shanghai-Los Angeles and Oakland route departing next week, and another offering $3,600 per 40 feet for a Shanghai-Ningbo route to the East Coast of the United States.
"After Chinese New Year until the end of February, spot rates from Asia will be very attractive - it's a market driven purely by supply and demand," explains Ms Fribourg. However, she added that long-term rates are being negotiated at "quite high" prices as shippers continue to prioritize access to capacity for large volumes of freight. "My advice to shippers is to make sure you have a certain number of cargoes on long-term agreements because that's how you get security," she said.
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The main way for shipping companies to stop the decline in freight rates is to cut capacity. Peter Sand, chief analyst at Xeneta, a freight benchmark platform, warned that the number of flights could increase significantly. According to Xeneta, the number of air traffic on the Far East-Mediterranean route will rise steadily in the week beginning February 24, reaching 38,900TEU, which is a 318% increase from the current level. On the Far East-Northern Europe route, the airline will reach capacity of approximately 75,700TEU by February 24, an increase of 449%.
"Carriers are not going to let rates collapse. They will do whatever they can to keep rates up and have become much smarter about capacity management in recent years, "Mr Sander said. He added: "We expect that more measures than have been announced so far will emerge in the coming weeks." In addition to this, the new services introduced by the Alliance will indirectly take up capacity when entering the new ring road."
