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| CCFI Commentary Issue 10, 2013 |
| Weekly Report of China Export Container Transport Market (CCFI Commentary in Issue 10, 2013) Capacity Control continued while market weakness unchanged The quietness of China export box market persisted this week. On most major trades, demand kept sluggish, as production in China will take some time to fully resume, while most carries are still cautious on capacity supply. As for short-sea services, voyages are gradually returning to service since their distances are relatively short. On Mar.01, the China Containerized Freight Index (CCFI) issued by Shanghai Shipping Exchange (SSE), the representation of the whole market, marked at 1134.82 points, down 1.5% from last week. Meanwhile, the Shanghai Containerized Freight Index (SCFI), the mirror of the spot market, stood at 1117.04 points, down 4.1% from a week ago. On the Europe service, demand was weak when factories in China reopened at early stage after the Lunar New Year. Some individual carriers carried less than half of the boxes last week compared to weeks before the holiday. Some carriers contracted capacity supply further to cope with this, while others didn’t, which caused individual carries saw very different average slot utilization rate, ranging from 50%-90%. In any way, the downward tendency of rates didn’t reversed. On Mar.01, the SCFI showed that the freight rate (covering seaborne surcharges) of service from Shanghai to base ports of North Europe dropped 7.9% from last week to $1104/TEU. Rates have dropped about $200/teu in two weeks after the holiday. For the time being, it may take about two weeks for volume to recover. Some market participants turn pessimistic about the effect of Mid-March rate restoration. However, whether the improvement will be successful is determined by carriers’ decision and extent. On the North America trade, due to the weak forward booking condition and lack of fresh shipments, the average slot utilization rate of USWC and USEC services continued to drop this week, at around 70%. The Southern China market was worse, with services out of there seeing the average slot utilization rate falling to less than 40%. On Mar.01, the SCFI showed that the freight rate (covering seaborne surcharges) of services from Shanghai to base ports of USWC and USEC marked $2287/FEU and $3447/FEU, respectively down 3.3% and 2.0% from last week. The USWC and USEC components of CCFI also declined. The former stood at 1099.68 points, a decrease of 1.8% week-on-week, while the latter plunged 1.2% from last week to 1270.33 points. Despite the continuous falling trend, carriers are not controlling capacity as strictly as they did on the Europe trade, showing their confidences in the prospect of this market. Although carriers cut capacity on the Persian Gulf service again following last week’s reduction, lowering quotation to attract cargoes has become the only strategy that lines to secure higher slot utilization. This is the second straight week that the average slot utilization rate stays under 50%. Rates plummeted this week. On Mar.01, the SCFI showed that the freight rate (covering seaborne surcharges) of service from Shanghai to base ports of Persian Gulf fell 11.2% from last week to $597/teu, the biggest decline this week among all trades monitored by SCFI. Currently, the lowest spot rates quoted by carriers are $575/teu. Demand didn’t show an obvious improvement after the Lunar New Year holiday on the Australia and New Zealand service. As members of Asia Australia Discussion Agreement just cut 36% capacity on this service following a 61% reduction last week, capacity supply loosened compared to last week, which, in turn, resulted in a moderate slide of average slot utilization rate of ships leaving Shanghai, at around 90%. Rates continued to dive this week. On Mar.01, the SCFI showed that the freight rate (covering seaborne surcharges) of service from Shanghai to base ports of Australia and New Zealand tumbled 2.1% from last week to $939/TEU. Volumes on the South America trade remained generally stable this week. However, some carriers tightened the capacity supply on the service from China to east coast of South America. As a result, the load factors of this service were stronger than those of services to the west coast, and ships were full loaded in some cases. Rates tended to stabilize this week. On Mar.01, the CCFI showed that the freight index of China/ South America service stood at 1044.58 points, down 1.5% from last week. On the Japan service, volumes and voyages started to resume this week, with the average slot utilization rate of ships leaving Shanghai rising back to around 70%. Rates moved flat this week. On Mar. 01, the CCFI showed that the freight index of Japan service quoted at 755.63 points, almost unchanged from last week. |
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