Asia-Mediterranean Rates Plunging

Since September, the demand for shipping along the Asia-Mediterranean routes has fallen sharply, and while carriers have countered this by cutting back capacity it has been insufficient to stop the inevitable erosion of market rates, according to Drewry’s latest report.

In percentage terms, the 11% drop off in headhaul volumes during September compared to August figures along the Asia-Mediterranean corridor mirrored that of the North Europe trade, Drewry reports.  The month-on-month teu count was down by some 49,000 teu and September turned out to be the second weakest month of the year to date after February. However, the trade still posted a 6.4% increase compared to twelve months earlier, and in the 18 months since March 2013 the trade has only once returned a year-on-year decline in monthly volume and that was in February of this year when an early Chinese New Year distorted comparisons with 2013.

Asian goods bound for the West Mediterranean sector (including North Africa) witnessed a larger fall in the month – some 13.5% – compared to the 8.5% decline in cargo headed for the eastern sector, which Drewry says it was mainly due to the fact that much of the Christmas merchandise destined for the developed markets of Spain, France and Italy had been dispatched by the end of August. In addition, the worsening situation in Libya impacted on the overall performance of the West Mediterranean sector.

During the first nine months of 2014, the volume split between the western and eastern sectors was finely balanced at just over 1.9 million teu apiece. In that period, West Mediterranean imports have grown faster at 8.9% compared to a 5.2% advance in traffic to the eastern region. Total trade growth for the year to date is registering 7.0% and that is also more or less the level of the current 12-month rolling average, after it peaked at 9.2% in May, according to the report.

No services have been suspended per se for the slack season although there were a clutch of void sailings in October that resulted in the lowest monthly supply of slots for over three years. Drewry believes that further omissions can be expected during the remainder of the year and during the first couple of weeks of January; some gaps may simply arise as a result of the two new alliances, 2M and Ocean Three, starting to implement their new schedules. None of this capacity culling has, however, allowed the carriers to effectively stem the haemorrhaging of rates in the spot market.

From a peak of USD 3,351 per 40ft on August 7, the going rates had fallen to USD 1,682 by the end of October. The shipping lines called for a massive USD 1,000 per teu rate hike on November 1, which did cause rates to rebound sharply in the first week of the month .

Thereafter, the inevitable collapse followed with rates heading back down to the USD 2,000 threshold as the month progressed. Currently, spot rates are no higher than a year ago.

A further GRI will follow in mid December – coinciding with the end year Bill of Lading cargo spike – with a quantum declared between USD 750 and USD 800, and Drewry expects there will most probably be yet another in mid January when the pre-Chinese New Year peak season commences. Both may give temporary respite to the continuous back-sliding but are unlikely to have any lasting effect.

Drewry says that there is still a premium for Asia-Mediterranean westbound traffic over that moving to North Europe in the order of some USD 400 per 40ft but even that may be eaten away in the months to come.

Source: Drewry