In the wake of the disaster that left the separate stern and bow portions of the Mitsui O.S.K. Lines containership MOL Comfort at the bottom of the Indian Ocean, average spot rates on the Asia-Europe trade have held onto most of the general rate increase that took effect on July 1.
The fact that the MOL Comfort wreck has taken some cargo vessel capacity out of the trade has been a contributing factor in this scenario.
Asia-Europe Spot Rates
In the weeks following the July 1st general rate increase, the Drewry-Cleartrade World Container Index for average westbound rates from Asia to North Europe nearly tripled to $2,622 per 40-foot-equivalent unit, (FEU), before dropping 1.1% to $2,592 per FEU; (26% lower than the $3,521 it reached in early July 2012).
This month’s spike has brought rates back to the same levels experienced at the beginning of the year, in large part because ocean cargo carriers are maintaining a hard line to stave off further losses on the anemic trade.
Neil Dekker, head of container research at Drewry Shipping Consultants in London said “The lines have obviously taken a very tough stance this time around to ensure that there is minimum erosion. The July 1 GRI has held up much better than in previous attempts because the rates were clearly very low and below break-even by the end of June.”
Carriers are reducing cargo vessel capacity by skipping some regular port calls, due to the continuing recession in Europe that has diminished demand for cargo shipments on the westbound route.
According to Lars Jensen, CEO of SeaIntel Maritime Research in Copenhagen, “It also helps that MOL had the involuntary scrapping of the MOL Comfort, and for a period the ships are out of action, temporarily replaced with smaller vessels.”
The loss of the MOL Comfort impacts several Asia-Europe services operated by the G6 Alliance between the New World Alliance, (to which MOL belongs), and the Grand Alliance.
Most of the ocean carriers on the Asia-Europe trade announced plans over the past two months to raise rates by $1,000 per TEU on July 1. By last week, they had gotten most of the increase, which was almost triple the prevailing WCI spot rate of $922 per FEU the week before. These rates are expected to drop before the next round of intended general rate increases, which are planned for August 1st.
“I expect the Asia-Europe rates to continue to erode slowly in the weeks leading up to Aug.1, but I do expect the carriers to get part of the Aug. 1 increases, more driven by the momentum of keeping discipline than anything else,” Jensen said. “I’m not so sure they will be as successful as the July 1 increases, but they’ll probably get a fair bit of it.”
However, the rate erosion that has followed every GRI so far this year isn’t expected to be nearly as steep this time around, with the MOL Comfort out of commission and cargo vessel capacity currently down on the Asia-Europe route.
Ocean Container Shipping
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