CCFI Commentary Issue 08, 2012

Weekly Report of China Export Container Transport Market
(CCFI Commentary in Issue 08, 2012)

Lines mull rate increase as demand resurgence

The latest comprehensive indexes kept stable as China export box market saw general demand rose modestly this week. On Feb. 24th, the China Containerized Freight Index issued by Shanghai Shipping Exchange stood at 941.20 points, almost no change from last week; while the Shanghai Containerized Freight Index issued by SSE jumped up by 2.9% to 977.09 points.

With the reopen of domestic factories after the holiday, the China/Europe and China/Mediterranean services both saw a firm momentum in demand and rates kept stable this week. Separately, volume rose remarkably in East China, improving the supply and demand situation in this region, and also resurged moderately in North China. However, demand recovered slowly in South China as the shortage of labor affected the manufacturing. On Feb. 24th, the freight index of the Europe service issued by SSE stood at 981.45 points, barely changed from last week.

However, some domestic shippers rushed to book spaces this week in order to ship their goods out before the rate increase, ranging from $700/TEU-$800/TEU, which will be carried out by lines from the beginning of next month. It was reported that shippers who has a handful of goods found themselves difficult to book spaces because of the tight space condition for some voyages, which to some extent supported the average rate level this week. On Feb. 24th, the freight rate plus surcharges from Shanghai to base ports of the Europe issued by SSE soared by 16.2％ to $826/TEU.

One expert said though volume surged this week, part of goods, due to be shipped in March, were transported ahead of schedule, which could bring a severer challenge to the balance of supply and demand in March. Consequently, the success and sustainability of this rate increase plan could be influenced. It is known that some lines are mulling to cut the capacity in the Q2 to relieve the current overcapacity, in the hope of creating a favorable environment for the rate increase plan.

Despite ships taken out by lines during the holiday had come back into operation, capacity supply was stable on the North America service this week. Boosted by the considerable increase of volume, the average slot utilization rate of the US west and south coast services rose to around 85% and the figure for the US west and north coast services was close to 80%.Rates kept stable this week. The freight index of service from China to USWC issued by SSE declined slower this week. On Feb. 24th, it tumbled 0.6% from last week to 931.82 points.

The average slot utilization rate of the USEC service where carriers controlled capacity more strictly reached above 90% this week, and some ships were reported full-loaded. Rate went up firmly. On Feb. 24th, the freight index of service from China to USEC issued by SSE stood at 1,136.71 points, up 1.8% compared to last week.

Volume kept stagnant on the Australia and Singapore services this week, where the average slot utilization rate only remained at around 60% and rate continued to go south within the week, with rates for some voyages falling down to just above $600/TEU. On Feb. 24th, the freight rate plus surcharges from Shanghai to base ports of the Australia and Singapore issued by SSE fell 0.5% from last week to $726/TEU.

Encouraged by the recent rate increase plan on the major east-west trades, carriers subsequently announced to raise the rates by $200/TEU-$500/TEU on several secondary routes, including the Persian Gulf service, the subcontinent service, the West Africa service, the South Africa service and the South America service.

The Japan service saw volume continued to increase this week, thus the average slot utilization rate of service from Shanghai to Japan rebounded to about 65% and rate kept stable. On Feb. 24th, the freight index of the Japan service issued by SSE was reported at 770.51 points, almost equal to last week.