CCFI Commentary Issue 14, 2012

Weekly Report of China Export Container Transport Market(CCFI Commentary in Issue 14, 2012)

Strong Europe and Mediterranean services made comprehensive indices buoyant

China export box market saw that volume kept stable this week and the rise of rate in deep sea trades such as North Europe and Mediterranean routes pushed the comprehensive indices further up. On Apr. 6th, the China Containerized Freight Index issued by Shanghai Shipping Exchange stood at 1,175.71 points, surged 3.6% from last week; while the Shanghai Containerized Freight Index issued by SSE rose 2.0% to 1,374.90 points.

In Europe trade, volume didn’t change a lot this week, where the average slot utilization rate remained above 90%, and some vessels were even reported full-loaded. Most lines lifted the rates for the Europe and Mediterranean services last week, the rest of them followed suit this week, which led to a higher rate level. On Apr. 6th, the freight indices of the Europe and the Mediterranean services issued by SSE increased 6.0% and 4.6% respectively to 1,608.80 points and 1,732.98 points.

The current rate level has returned back above the breakeven point after lines boldly increased the rates several times this year. However, the rate increases were largely based on the collective moves by lines rather than the strong recovery of volume. Lines are taking every effort such as capacity management to improve the supply and demand situation, one of the key factors to decide which direction rates to move.

It was reported that some lines announced to implement super-slow steaming on the backhaul leg of Asia/Europe trade. That means containerships will be sailing at half the full speeds of 24-25 knots that were being used before the financial crash in late 2008. This move will apparently cut the real capacity on this market, then mitigating the oversupply and somewhat supporting the current rate level, if their peers take the similar measures.

Volume was steady in the North America service this week. Hence, the average slot utilization rate for the USWC and USEC services both stood at around 90%, almost unchanged from last week.
Spot rates of this trade fluctuated. On Apr. 6th, the freight rates plus surcharges from Shanghai to base ports of USWC and USEC issued by SSE stood at $2,028/FEU and $3,207/FEU, both barely changed from last week.

It is reported that lines will hike transpacific rates up on Apr.15 following the last rate increase in March, with the average increase of $400/FEU. Some insiders analyze that lines do so to lift the contract rates level before May when annual service contract negotiations of U.S. trade are in progress.

As volume leveled off in the Australia and Singapore service this week, rates eased back. On Apr. 6th, the freight rate plus surcharges from Shanghai to base ports of the Australia and Singapore issued by SSE tumbled slightly by 0.7% from last week to $981/TEU.

The South America route saw a drop both in volume and rate. On Apr. 6th, the freight rate plus surcharges from Shanghai to base ports of South America issued by SSE dipped 1.0％from last week to $1,499/TEU.

Since the beginning of this year, rates have gone up remarkably in this marketplace, but the limited growth of volume and insignificant shrink of capacity gave little support to rates that dropped recently.

There was a small increase in volume in Japan service this week, with the average vessel utilization from Shanghai to Japan ports standing at just over 75%. Spot rates went flat this week. On Apr. 6th, the freight index of the Japan service issued by SSE marked at 809.27 points, down 0.7% against last week.