Asia-Europe rates continue to strengthen as carriers launch IMO 2020 tariffs

The European components of the Shanghai Containerized Freight Index (SCFI) recorded a second consecutive week of spot rate gains this week as carriers successfully increased their FAK rates and imposed peak season surcharges (PSSs).

However, the star of the show was the Asia to the Mediterranean tradelane, which saw an 18.4% surge to $850 per teu after strong demand. Rates on the route have now recovered to the same level as a year ago.

Given the positive booking outlook for the Mediterranean, Hapag-Lloyd has introduced a $400 per teu PSS from 9 August, while CMA CGM’s, of $450 per teu, will kick in on 5 August.

Meanwhile, the SCFI recorded a 6.9% uptick for Asia-North Europe spot rates to $806 per teu, but rates still remain around 18% below the level of a year ago, despite the withdrawal of some 150,000 teu of capacity during the peak season.

THE Alliance carriers announced a further blank sailing this week, the FE5 loop in the first week of September, which Hapag-Lloyd attributed to “expected changing market demand”.

The soft peak season demand on the route suggests carriers will have difficulty pushing up their FAK rates any further, let alone successfully applying a PSS.

Some carriers on the route have begun to publish their FAK rates in tandem with their fuel recovery surcharges, in readiness for the expected jump in fuel costs, a consequence of the IMO’s 0.5% sulphur cap coming into force on 1 January.

For example, Hapag-Lloyd said its FAK rate from Asia to North Europe, effective 15 August, would be $1,570 per 40ft, with the addition of an MFR (marine fuel recovery) surcharge of $452.

The substantial number of advertised headhaul sailings cancelled this month and last will have a knock-on effect of cancelled backload eastbound voyages, suggesting that European exporters to Asia will be scrambling for space in September and October.

On the transpacific, shippers and carriers are having to digest the latest escalation in the US-China trade war. Notwithstanding the ongoing trade negotiations between the world’s two biggest economies, President Trump tweeted yesterday that the US intended to impose a 10% duty on the remaining $300bn of annual Chinese imports from 1 September.

He added that the US would “continue taxing Beijing until a trade deal is reached”.

The SCFI recorded a 10.9% jump in spot rates for US west coast ports to $1,589 per 40ft, while rates for US east coast ports were unchanged on the week at $2,801 per 40ft.

Carriers can expect demand to be stronger from China to US west coast ports in the next week or so as shippers seek to front-load cargo in order to beat the start date of the new raft of tariffs.

In the meantime, ocean freight rate benchmarking firm Xeneta has published its July index report on long-term contract rates. The Oslo-headquartered company said that beneath the surface of a “relatively calm” month for contract rates, there was a “maelstrom of activity, adjustments and market uncertainty”.

Commenting that a decline in its XSI July index of 0.4% on the month was “nothing to write home about”, chief executive Patrik Berglund nevertheless cautioned that the industry was “playing out an increasingly high-stakes game, with the potential for widespread market impact”.