Podcast container market report Nov 25By james tweed • Nov 27th, 2011 • Category: Containers
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Thank you for downloading the container market report from Coracle Online and GFI for November 25th 2011. This report will look at the derivative and physical markets.
We start with the paper market and the Shanghai NW Europe route where over the course of the week we have seen the impact of spreading interest on the forward curve. The general idea is: sell prompt, and buy deferred. As a result we saw a steepening of the forward curve. Meanwhile, on the Shanghai USWC route, not much changed in the CFDA forward curve. Last week we mentioned that the differential between the rates in China and on the international markets was too wide. In line with our expectations, the spread is narrowing as a result of the Chinese selling their “inflated” rates lower…
On the physical market and the Asia Europe lane, finally, Maersk has announced that they will adjust capacity. Unfortunately it is on one of their smallest schedules from the Middle East and India towards NW Europe, representing about 1.5% of the total supply. Meanwhile OOCL tries to stir up the fire, by recycling old announcements and telling the market about their 20% capacity cut. Supply appears to be chasing the falling demand on the way down but these capacity cuts do not mean that the market is all of a sudden in balance.
Transpacific volumes remain steady with utilisation rates hovering at 85-90%. Many market participants are expecting only half of the announced GRI ($400/feu by the TSA) to be implemented on the 1st Jan and most do not anticipate that GRI to stick for long.
In Chinese there is no word for crisis, the word crisis simply doesn’t exist. The Chinese use two characters to represent the word crisis. One character represents danger, and the other opportunity. Over the past year we have continuously pointed out the danger that the falling freight rates represent to the carriers. However, we also see a great opportunity for carriers and freight forwarders in the current “lowish” markets. The current “lowish” markets are a great opportunity for carriers / freight forwarders to offer index linked contracts to
their customers. Not only will an index linked contract follow the spot market (we think that the upside is currently bigger than the downside). Index linked contracts also have the benefit to improve the perceived reliability of a carrier. Carriers no longer have to penalise their customers in a rising market by rolling over cargo or charging them way in excess of the agreed “fixed” rate (for example, see the Argos / Maersk law case) . Customers consider these roll overs or rate increases unfair, and they harm the reputation of your company. A few of these actions can cause the perceived reliability to go to zero.
Thanks for listening