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The Coracle Container market podcast for June 15, in association with GFI

By • Jun 18th, 2012 • Category: Containers

The Coracle Container market podcast for June 15, 2012 in association with GFI

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Thank you for downloading the container market report from Coracle Online and GFI for June 15th 2012. This report will look at the derivative and physical markets.

We start with comments on the paper market and the Shanghai – NW Europe route where there was a flurry of activity this week with Q3 trading at $1600/TEU and Q4 was trading at $1450/TEU, a 1% premium and 9% discount to the current spot market. For all the shippers and forwarders who expect rates to remain at similar levels in Q4, fixing at $1450/TEU or a 9% discount to the current spot market is an attractive proposition, and level, at which to be hedging your rates in the paper market.

On the Shanghai – USWC route and in line with the increase in the SCFI, the front month of the forward curve saw a $95/teu rise in value as part of the June 10 PSS was factored in. What was interesting to note was the dramatic fall in value of the Aug 12 contract on the SSEFC, Shanghai’s electronic container derivatives trading platform, which fell by 19% from last week. With the CFDA curve trading at $2628/feu, a 4% discount to the current spot rate in the physical market, it is certainly not suggesting a sudden mudslide in rates over the coming months.

No we look at the physical market and we’ll start with the Asia – Europe route where rates are expected to continue softening until the end of June, when there will be more clarity on the 1st July GRI. It appears that for a number of shippers, with contracts expiring in June, they are still reluctant to fix any rates for Q3 and Q4 as they wait for rates to play out. Since last Friday 3 more carriers, namely Hanjin, APL and MSC, have announced a GRI of $500/TEU. They follow Cosco at 530, Kline at 525, Zim at 515, UASC at 505, Hapag-Lloyd at 500, CSCL at 475 and OOCl at 400.

Average vessel utilisation levels are this week reported to be at 85% (some of the smaller carriers are reporting 95% or more), but this year’s peak season is looking relatively flat as the euro crisis continues to drag on, resulting in a weaker euro, which makes imports more expensive. This is in addition to lower levels of consumer spending and a cautionary market outlook. As the saying goes, it will get worse before it starts to get better, but at least freight rates have now returned to a level that is sustainable for carriers.

On the transpacific route carriers have managed to push through with a partial increase of the tsunami like $600/FEU PSS, which has kept many key industry players busy this week.

On a general note, a friend once described supporting his football team as like being on a merry-go-round. ‘A true fan is there for his team, following them through the heady highs and the devastating lows’. Unfortunately in his case, there were more of the latter than the former. In some ways, carriers bear similarities to football clubs. Many football clubs are in debt after spending too much on players, and many liner companies are mounted in debt after placing orders for the ultra large container vessels. Like football, freight rates are a merry-go-round. Rates will rise and fall, then rise, then fall. A surcharge can be a success, it can also turn out to be a failure. Carriers took a tumble from the carousel in 2011 as the market share rate war erupted, fuelled by the delivery of the ultra large vessels and an unstable macroeconomic environment. Then when the carousel was nearly running on empty in December 2011, carriers were determined to get back on and the nearly 300% increase in freight rates since December 2011 showed just how anything goes in a merry-go-round. So there was a small blip at the start of June when the Asia -Europe Peak Season Surcharge failed to go through as ships were not running full and a strong peak season was unlikely this year. Now with rates in their sixth consecutive week of falls, carriers are determined to bring rates back to an all time high if the General Rate Increase goes through in July.

Thanks for listening