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Container market shipping market exhibits lack of confidence. Jan 13

By • Jan 15th, 2012 • Category: Containers

The Coracle Container market podcast for Jan 13, 2012 in association with GFI

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Thank you for downloading the container market report from Coracle Online and GFI for January 13th 2012. This report will look at the derivative and physical markets.

We start with the paper market and the Shanghai – NW Europe route where the forward curve fell marginally in value this week, especially in the prompt months, which was in line with the small movement in the index. We are already starting to see signs of the PSS surcharge implementation in late December plateau as we head closer to the start of the Chinese New Year. With only one more publication for the remainder of this month, the forward curve is reflective of market participant’s expectations of rates falling in both Feb and March.

Similar to NW Europe, the Shanghai – USWC curve remained largely unchanged this week as the extent of the PSS surcharge is expected to be priced into rates until the end of this month. What is interesting to see is that the SSEFC is pricing a 5% and 7.6% discount in Feb and March to spot levels, which only reflects the markets lack of confidence of rates holding post Chinese New Year.

On the physical market Asia – Europe, with 10 more days left until the start of the Chinese New Year, it gives us another 10 more reasons to be more bearish on the freight rate outlook for the remainder of 2012. Capacity utilization is currently running around the 95% level and the combination of strong volumes and capacity cuts in Q4 2011 have resulted in a tighter capacity situation. As a result, carriers were successful in pushing through a PSS in the last week of December, but the general consensus in the market is for rates to come off at the start of February and remain around the $600/teu levels for at least the rest of Q1.
What is also worth noting is that some freight forwarders and BCO’s have been able to secure 6 month contractual rates for as low as $575/teu. This only reflects the looming overcapacity situation to plague the market even further this year. As Alphaliner mentioned in their report this week, the fleet is expected to grow by 8.2% in 2012, with 49% of the fleet in the over 10,000 teu size profile and only able to be deployed on the Asia – Europe trade lane. With demand in the Eurozone to remain flat for this year, there is already a 4.1% demand-supply imbalance and that is assuming that ships are running on 100% utilization, demand does not fall into negative territory and no capacity adjustments are made.

The sentiment for the Transpacific trade lane is very much similar to that of Asia – Europe. Shippers cited that it didn’t take a genius to work out that the recent rate recovery was only implemented because of the upcoming Chinese New Year. One shipper didn’t regard the carrier’s rate increases as a ‘true success’ given that the cargo rush pre-Chinese New Year is normally longer and not just three weeks. The short time span of the pre-Chines New Year cargo rush in itself is an indication of weak market demand. It will come as no surprise to many if cargo volume and correspondingly, rates, fall off a cliff post Chines New Year as history goes to show. 2012 does not look like it will be an exception.

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