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2018 profitability could be jeopardised by freight rate war

Mon 16 Apr 2018 by Rebecca Moore

2018 profitability could be jeopardised by freight rate war
Lars Jensen (SeaIntelligence Consulting): There has been a rekindling of the freight rate war on the Asia-Europe trade

There has been a “rekindling of the freight rate war” on the Asia-Europe trade following a plunge in spot rates.

SeaIntelligence Consulting chief executive Lars Jensen said Asia-Europe spot rate declines were, until recently, in line with the usual, expected weakening following Chinese New Year (CNY).

But last week’s additional decline “decisively broke the trend”.

Mr Jensen pointed out that the Shanghai Containerised Freight Index spot rate decline means rate levels are now 17% lower than what the seasonal developments can account for.

He explained “The seasonality should have seen the rates level out a couple of weeks ago, but the opposite has happened. Two weeks ago, we had still seen rate declines versus CNY more severe three times before. One week ago, we still had seen rate declines more severe twice before. This week was a record low versus CNY except for 2015 which at the time was driven by the extremely sharp drop in fuel prices.”

He summed up “The only way to accurately describe the data right now is as a re-kindling of the freight rate war on the Asia-Europe trade.”

Carriers announced rate increases on 16 April. Mr Jensen said that whether these increases are successful or not will show in the coming week whether the rate war was a “short-term spat in the traditional post-CNY market or whether it is a much more serious issue in which case the profitability for all of 2018 is in jeopardy”.

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