CCFI Commentary in Issue 45, 2012

Weekly Report of China Export Container Transport Market Indices went down amid sluggish demand Demand on major east-west bound trades dived and rates went south further, that was the general picture of China exports box market this week. On Nov. 16, the China Containerized Freight Index (CCFI) issued by Shanghai Shipping Exchange (SSE) stood at 1,152.85 points, down by 0.3% from last week; while the Shanghai Containerized Freight Index (SCFI) tumbled by 4.9% to 1,134.98 points. The Europe service has head into the slack season, where demand continued to shrink this week. Although major lines took means to cut capacity, the over-tonnage situation didn’t improve thoroughly, and the average slot utilization rate was less than 80%. Regionally speaking, lifting out of East China and South China declined at a slower pace than North China, and the average slot utilization rate can still remain at around 80%. However, lifting out of North China fell sharply because of its less various export goods that is vulnerable to volatile market. The average slot utilization rate slid to about 75% this week. Rates for some China/Europe voyages plunged up to $300/TEU, while most shrank about $100/TEU. On Nov. 16, the SCFI showed that the freight rate (covering seaborne surcharges) of service from Shanghai to base ports of Europe quoted at $1,225/TEU, down by 11.4% from last week. This compared to decline of 7.2% last week. The Mediterranean service was hit harder, where the average slot utilization rate went down to 75%. In some cases, ships can only be 65% filled. Rates for individual voyages have been below the bottom line since this month. The deteriorated supply/demand equilibrium made rates plummeted from a low base this week. On Nov. 16, the SCFI showed that the freight rate (covering seaborne surcharges) of service from Shanghai to base ports of Mediterranean plunged by 10.4% to $856/TEU, almost falling back to the level before the significant increase in March. Given the current unsustainable rate level, lines plan to increase rates significantly next month. It was said that some lines had announced they would lift rates by $500-$600/TEU since Dec.15. Demand spiraled down this week on the North America trade, where the average slot utilization rate remained at around 90%. Carriers cut rates aggressively to compete for more cargos, and rate level continued to fall. The planned rate increase on Dec.1 has been postponed to mid-Dec. On Nov. 16, the SCFI showed that the freight rate (covering seaborne surcharges) of service from Shanghai to base ports of USWC and USEC stood at $2,224/FEU and $3,246/FEU, respectively down by 3.7% and 2.2% from last week. On the Australia and New Zealand service, market became quiet this week as almost all Christmas goods had been shipped before last week. Demand dropped, with the average slot utilization rate of this service slipping to around 90%. Rates continued to go down. On Nov. 16, the SCFI showed that the freight rate (covering seaborne surcharges) of service from Shanghai to base ports of Australia and New Zealand stood at $1,081/TEU, 3.5% lower than last week. Economy in Middle East worsened because of the continuous political turbulences in this region, which resulted that demand has been falling sharply since the beginning of this month on the Persian Gulf and Red Sea service. Separately, the average slot utilization rate of the Persian Gulf service slid to about 60% and rates dived as lines added massive capacity to this trade previously. In contrast, some carriers withdrew some sailings on the Red Sea service, which brought a relief to this oversupplied market, with the average utilization at some 70%. Rate decrease slowed this week. On Nov. 16, the CCFI showed that the freight index of Persian Gulf and Red Sea service marked 990.25 points, down by 5.0% from last week. Volume rose slightly this week. Ships leaving Shanghai for Japan can be 70%-plus filled. Rates kept stable. On Nov. 16, the CCFI showed that the freight index of this service tumbled by 1.0% to 782.97 points.