After both lost ground the previous week, one measure of spot rates ticked up 1.4 percent sequentially last week, while another slipped 1.1 percent.
Two of the primary indices for measuring spot rates for container shipping were headed in the opposite direction last week.
Container freight rates had shown several weeks of sequential losses after the Lunar New Year holiday in Asia, with both the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index and the World Container Index, produced by London-based maritime shipping consultant Drewry, playing out in roughly similar patterns.
But after pricing receded again two weeks ago following a brief rebound, the composite SCFI, which measures spot rates on 13 different outbound trades from Shanghai, ticked up 1.4 percent last week, while the WCI slipped 1.1 percent.
The SCFI’s Friday reading of 764.34 also was down 10.4 percent from 853.43 as of May 26, 2017, while at $1,352 per FEU, the WCI was 6.6 percent lower than at this time last year.
According to the SCFI, rates from Shanghai to Europe rose 4 percent last week, from $793 per TEU to $825 per TEU, while rates from Shanghai to the Mediterranean grew 6.7 percent, from $795 per TEU to $848 per TEU.
Transpacific rates, however, did not fare as well, with pricing from Shanghai to the U.S. West Coast slipping 1.9 percent, from $1,308 per FEU to $1,283 per FEU, and rates to the U.S. East Coast falling 2.6 percent, from $2,331 per FEU to $2,271 per FEU.
But according to Drewry, pricing from Shanghai to Rotterdam and Genoa slid 1 percent each from the previous week to $1,450 per FEU and $1,633 per FEU, respectively. Rates in the Asia-North Europe trade were down 18 percent from the same week a year ago, while Asia-Mediterranean rates were down 10 percent.
Eastbound transpacific rates from Shanghai to Los Angeles declined 3 percent from the previous week to $1,358 per FEU, but were actually up 8 percent year-over-year. Pricing from Shanghai to New York was relatively steady on a sequential basis, falling just $10 to $2,462 per FEU, but were up 7 percent from the same 2017 period.
And at $1,918 per FEU, rates in the westbound transatlantic trade remained in positive territory, stagnating from the previous week but rising 10 percent from this time last year.
In its weekly analysis, Drewry said it expected rates to “remain stable” again next week, but if rates were to resume their precipitous post-Lunar New Year decline, it could spell disaster for container carriers, many of which last year returned to profitability after losing billions in 2016 as overcapacity pushed rates to well below operating expenses.
As noted here previously, some of the discrepancy between the SCFI and WCI can be attributed to the fact that although the two indices measure many of the same rates, their composition and methodology are slightly different. The SCFI, for example, includes several “lesser” north-south trade lanes between Shanghai and the Middle East, Oceania, Africa, South America and even some intra-Asia pricing, whereas the WCI does not. The WCI also includes transatlantic rates, while the SCFI is dedicated to Asia trade.
The SCFI also only tracks outbound—headhaul—rates from Shanghai, whereas the WCI tracks both headhaul and backhaul. As such, an increase in the composite SCFI coupled with a decline in the composite WCI could be indicative of rising headhaul rates that are being offset by falling backhaul rates in the WCI.
But as noted above, the individual trade lane components of the WCI in this case actually showed declines on outbound Asia-Europe routes, while the SCFI showed increases in those same headhaul trades.
Another issue is timing. Tracking rate developments on a weekly basis is certainly important for shippers looking to get their goods from point A to B in the cheapest, most efficient way possible, but an aggregate index is likely never going to be as agile as the market itself, so certain trends and patterns may not be reflected immediately.
With major carriers like Maersk Line, CMA CGM and Hapag-Lloyd, as well as smaller players like Yang Ming and ZIM, already beginning to report less than stellar first quarter 2018 earnings, shippers should keep a close eye on the current rate situation, as carriers will be likely be forced to increase rates, or at the very least maintain them, in order to remain profitable.
Container rate indices sending mixed signals
