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Container Freight Rates Fall as Demand Weakens

Global container freight rates continue to be depressed by demand, despite some recent upticks.

The World Container Index (WCI) assessed by Drewry, a composite of container freight rates on eight major routes to and from the U.S., Europe and Asia, was down 1.2% to $1,385.17 per 40-foot container, or FEU, for the week ended Sept. 21.

The composite index was also down by 4 percent from the same period in 2016. The average composite index of the WCI, assessed by Drewry for year-to-date, was $1,532 per FEU, which was $100 lower than the five-year average of $1,632 per FEU.

“The less-than-expected demand has already watered down by GRIs (general rate increases) in September,” Drewry said. “The World Container Index between Shanghai and Rotterdam lost another $84 for a 40-foot box this week to reach $1,451. The hurricanes roiled volume to the East and Gulf Coast of the U.S., causing Transpacific rates to see-saw. While the rates from Shanghai to Los Angeles increased by $61 to reach $1,546 per FEU, rates on Shanghai-New York declined by another $37 to reach $2,135 per 40-foot box.”

The latest Shanghai Containerized Freight Index (SCFI), using Shanghai as a base origin port and forecasting rates for the week ahead, showed that price gains earlier in the month on the transpacific will be short-lived and soon wiped out.

Sentiment improved among transpacific carriers after they had achieved at least some success with their mid-month general rate increases, following failed attempts to raise rates at the start of September, when GRIs fell flat.

Carriers announced GRIs ranging from $400 to $1,000 per FEU, effective Sept. 15, and although at best they managed to push rates up just $113 per loaded FEU on eastbound U.S. West Coast services, there was at least encouragement that rates were heading in the right direction. Asia-U.S. east coast spot rates climbed $38 on the back of the GRIs.

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In reporting a first-half profit of $339 million last month, Maersk Line, the largest global container freight carrier, credited demand growth of 4 percent that outgrew nominal supply growth of 1.4%. The company said the improvement in market fundamentals in past quarters has started to reflect in the freight rate, which increased 22 percent in the second quarter compared to same period a year earlier and 7.6% compared to the first quarter.

Freight rates increased by 36 percent on East-West trades and 17 percent on North-South trades.

This month, CMA CGM said the increase in freight rates on most of its lines led to a significant 12.5% increase in average revenues per container in the second quarter of 2017.

[Read more about shifting freight prices: Freight Rates Set to Climb, Boosting Ocean Carrier Profitability]

However, these gains appear to be short-lived. Last week’s SCFI shows prices per FEU on the Asia-U.S. West Coast and Asia-U.S. East Coast trades fell 6.4% to $1,484 and 7.2% to $2,105, respectively.

Additional capacity, deployed before the start of the October Golden Week holidays in China and marking the end of the peak season, has continued to curb rate increases, analysts noted. Similarly, on the Asia-Europe trade the steady influx of new capacity from carriers has been more than enough to match demand increases over the course of the season.