CCFI Commentary Issue 03, 2012

Weekly Report of China Export Container Transport Market
(CCFI Commentary in Issue 03, 2012)

China export box market generally kept its upward movement this week. As the increasing demand on oceangoing trades such as U.S. and Europe services, full slots became common on those trades among shipping lines. On Jan.13th, the China Containerized Freight Index issued by Shanghai Shipping Exchange stood at 920.56 points, jumped up 2.7% from last week; while the Shanghai Containerized Freight Index issued by SSE surged 0.6% to 981.05 points.

The seasonal factor of the export peak ahead of the Chinese New Year still worked this week. Full-loaded was seen on most sailings as the upsurge of volume in a short time. Rate fluctuated slightly after a strong recovery in previous weeks. On Jan.13th, the freight rate plus surcharges from Shanghai to base ports of the North Europe issued by SSE rose 0.4％ to $733/TEU, while the all- in rate for the Mediterranean service surged 2.4% to $772TEU.

However, some industry insiders told that lines can’t be profitable at current rate level and expected a bleak outlook for the future market, despite the recent prosperity. In capacity terms, since almost all of the 10,000 teu-plus vessels delivered last year were sent to the Asia/Europe corridor, the increase of capacity, which is hard to change in 2012, led to a severe imbalance of supply and demand. In addition, the daily sailings service offered by some carriers also amplified the market panic. Taking a look at the another side of the supply/demand equation, European economy would be less likely to turn around this year as the debt crisis in Europe still cast a shadow on this continent. If carriers can’t control the capacity management effectively, the weak growth of demand and increasing new-added capacity would put a downward pressure on rate.

The upward trend extended to this week on the North America service so that carriers announced no space for both USWC and USEC services. Rate fluctuated slightly this week after a strong recovery in previous weeks. On Jan.13th, the freight indices of services from Shanghai to USWC and USEC issued by SSE stood at 891.92 points and 1,113.96 points, up 4.0% and 4.1% respectively from a month ago.

As the holiday in Asia approaches, shippers scrambled to ship goods before the holiday, which resulted in a condition of tight space, with the average slot utilization rate reaching 100%. Traditionally speaking, space booking could shrink in the final week before the holiday, making the market cool down. On the other hand, the existing capacity in the operation is still large. Therefore, the overcapacity is hard to mitigate in the short run and rate is still under the pressure, despite the recent capacity cut move by carriers.

The volume boosted by the export peak before holiday and continued to rise this week on the Persian Gulf service where 100% slot utilization rate was reported. On Jan.13th, the freight rate plus surcharges from Shanghai to base ports of the Persian Gulf issued by SSE rose to $647/TEU, up 0.8% from a week earlier.

The Japan service saw a marginal rise in volume, where the average slot utilization rate reached about 75% and rate kept stable. On Jan.13th, the freight index of the Japan service issued by SSE was reported at 774.41 points..