Spot container rates were largely flat for the third week in a row as it became apparent that the November 15 rate increase on Asia-Europe routes had little impact on pricing.
The Drury World Container Rate Index (WCI) global composite rate fell 1 percent, but the Shanghai to Rotterdam route rose 1 percent to close the week at $4,071 per 40 feet, while the Shanghai to Genoa route rose 3 percent to $4,520 per 40 feet.
While these rates are about 255 per cent and 229 per cent higher than the same period last year, respectively, freight forwarders on various routes say that repeated recent attempts by carriers to further increase spot rates appear to have had little effect and they are sceptical about the impact of the new FAK (all types of freight) rate levels due to be implemented on December 1.
"The rate level has been flat, we keep receiving GRI [general rate increases] but it will disappear soon and we don't expect a big rate increase in December," said one industry source.
Traditionally, the last two months are when carriers and their customers finalize their annual Asia-Europe contract terms for the following year, and the level of contract terms is often influenced by the movement of spot rates. Now, the industry is waiting to see if the December 1 FAK price increase will continue.
Cma CGM announced FAK rates of $6,500 per 40 feet for Asia to Western Mediterranean ports, the same rate Mediterranean Shipping announced earlier, and Hapag-Lloyd will set rates of $6,100 to Northern Europe and $6,400 to Western Mediterranean on the same day.
Given that Asia-Europe spot rates have to rise by 50 per cent every week to achieve the level of freight carriers are looking for, the likelihood of these FAK rate increases being fully realized seems close to zero.
Hapless Chief Executive Rolf Habben Jansen told analysts on the company's third-quarter earnings call that "it's still early days for the Far East contracting season." He added: "In many cases, negotiations have already begun, but most of these contracts will not be completed until the first quarter. In the early contracts, we can definitely see rates going up. It has not reached the spot level yet, but it is definitely higher than before.
Meanwhile, WCI's Shanghai-Los Angeles spot rate fell 5% this week to $4,488 per 40 feet, while the Shanghai-New York route was flat at $5,210 per 40 feet.
Drewry's "cancellation Tracker" report shows that 70 sailings have been cancelled between next week and the end of the year, representing about 10 per cent of planned departures worldwide.
On the major East-West trade routes - Trans-Pacific, Trans-Atlantic, Asia-Nordic and Mediterranean - the cancellation rate was 10 percent during week 48 (November 25 to December 1) and Week 52 (December 23 to December 29).
The majority of these cancellations will occur on trans-Pacific eastbound routes (50%), followed by trans-Atlantic westbound routes (27%) and Asia-Nordic and Mediterranean routes (23%). Over THE next five weeks, THE Alliance, OCEAN Alliance and 2M will each cancel 14, while non-Alliance services have announced 28 cancellations over that period.
The consultancy warned shippers and freight forwarders that there could be more cancellations, while the reliability of shipping schedules could also be affected. "Over the next five weeks, we expect schedule reliability to decline, with around 10% of ships expected to miss scheduled voyages. In order to maintain the higher rates, carriers may cancel more voyages and shippers should actively prepare for potential disruptions, "the company said.
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