Search By Topic The Green Supply Chain Distribution Digest
Supply Chain Digest Logo

Category: Global Supply Chain

Global Supply Chain News: Ocean Container Rates from Asia to US Soar as Carriers Finally Learning Lessons from the Past

 

 

Cancelling Sailings, Idling Ships Working for Now

 

June 17, 2020
SCDigest Editorial Staff

It has been tough times for ocean container carriers, with falling demand continuing as a result of the coronavirus crisis and its impact on consumers and business.

But carriers have been able to keep rates steady by pulling back on capacity, and prices are heading even higher – at least for now.

Supply Chain Digest Says...

"Whether rates will ease downwards or lines will prop them up by continuing to withhold capacity to create a 'new normal' remains to be seen," DHL says.

What do you say?

Click here to send us your comments
 
Click here to see reader feedback

A week ago, the Shanghai Containerized Freight Index (SCFI) recorded a 29% surge in spot rates from Asia to the US west coast, rising to $2,755 per 40-foot container, which is almost twice the level at the same point in 2019.

For shipments from Asia to US east coast ports, the index was up 19% for the week, to $3,255 per container, up 32% higher year over year

Feeling bold, the carriers have rolled out another general rate increase (GRI) last week, according to the Loadstar.com web site, after a rate hike at the end of May produced a 25% bump in spot rates to US west coast ports.

That even though demand from Asia to the US west coast fell some 17% in May. Volume overall is down 10 to 20% in Q2, with a slight recovery starting in June," said Dominique von Orelli, Global Head of Ocean Freight at DHL Global Forwarding. But carriers have been able to largely maintain rates by cancelling about 20% of all sailings out of China.

A blog post on the DHL website noted that the maintenance of rates in the face of falling demand "has been achieved through a collective effort by carriers refusing to repeat past mistakes. Aided by the container shipping alliances, lines have held their discipline and avoided cutting rates to fill vessels. Instead, they have slashed service frequencies by mass blanking sailings."

Container lines canceled more than a quarter of all sailings on Asia-to-Europe and trans-Pacific lanes since the beginning of March. SeaIntelligence Consulting says that equates to the withdrawal of more than 4 million containers of capacity, and notes and that carriers have continued to drop departures scheduled for the third quarter, signaling expectations of continued weak demand.


(See More Below

CATEGORY SPONSOR: SOFTEON

 

 

 

Then there is the idled containership fleet, which reached an all-time high of 2.72 million twenty-foot equivalent units (TEU) at the end of May, equivalent to 11.6% of the overall fleet capacity, according to the analysts Alphaliner. Some of the idle fleet, however, came from carriers taking ships offline to install scrubbers to reduce mandated sulfur emissions.

"Whether rates will ease downwards or lines will prop them up by continuing to withhold capacity to create a 'new normal' remains to be seen," DHL says.

However, Peter Sand, a shipping analyst at BIMCO, believes idled vessels are only temporarily hiding carrier losses. He expects carriers will need to try a new approach sooner rather than later.

"While savings are made by not sailing - with voyage costs and some operating costs avoided - the empty ships are still generating a loss on a daily basis, with some of the operating costs still present and financing costs unchanged, while not providing any income," Sand said.


Can container carriers keep rates stable or even higher? Let us know your thoughts at the Feedback section below.

 

Your Comments/Feedback

 

Features

Resources

Follow Us

Supply Chain Digest news is available via RSS
RSS facebook twitter youtube
bloglines my yahoo
news gator

Newsletter

Subscribe to our insightful weekly newsletter. Get immediate access to premium contents. Its's easy and free
Enter your email below to subscribe:
submit
Join the thousands of supply chain, logistics, technology and marketing professionals who rely on Supply Chain Digest for the best in insight, news, tools, opinion, education and solution.
 
Home | Subscribe | Advertise | Contact Us | Sitemap | Privacy Policy
© Supply Chain Digest 2006-2019 - All rights reserved
.