[281113.EN.SEA] Asia-Europe Rates Double, But Not Enough To Right 3 Months Of Erosion

THE World Container Index’s (WCI) Shanghai-Rotterdam freight rate assessment increased US$1,403 to $2,498 per FEU, more than doubling spot prices after a three month of decline, say Drewry analysts.

Year to date average rates for the Asia-Europe trade are still below the 2012 average. Although last week’s general rate increase has been successful, it has was not enough to right rate erosion over the last three months, they said.

The weekly WCI, which captures freight rates with a contract validity of up to one month, confirmed last week that the price increases of $750-$1,000 per TEU from carriers from November have been largely accepted by the market.

“The recovery in pricing comes at a critical time for carriers, midway through fourth quarter talks for 2014 contract rates,” said WCI director Richard Heath, who added that liners would use that leverage in current contract talks.

The recent surge in rates follows a period of decline in which the index’s Shanghai-Rotterdam rate assessment had fallen more than 55 per cent since it peaked in early August.

Said Drewry’s benchmarking research chief Martin Dixon: “Sustainability of rate levels depends on steps carriers take to limit capacity. With many more ultra large container vessels due a reliance on skipped sailings will not prevent rate erosion.”

Drewry stressed that week-to-week increases in rates are less significant than how long the increases hold.

Drewry urged shippers to consider index-linking to avoid contract default at a time of rate volatility while conceding its index is a 50:50 joint venture with Cleartrade Exchange.

“The WCI is an index which can be used by physical and derivative market participants to manage freight risk,” said Drewry, explaining that it reports individual market prices on major east-west container shipping routes.

Prices for 11 individual routes and a composite index are reported each week. These cover trade in both directions between Asia, North America and Europe.

Drewry Maritime Research is the research arm of the Drewry group. Drewry also includes two advisory brands, Drewry Maritime Advisors and Drewry Supply Chain Advisors. Drewry has over 40 years’ experience, employing 90 specialists in London, Delhi, Singapore and Shanghai.

Source : HKSG.