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Container rates softening but derivatives point to transpacific recovery late 2013

By • Aug 17th, 2012 • Category: Containers

The Coracle Container market podcast for Aug 17, 2012 in association with GFI

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Thank you for downloading the container market report from Coracle Online and GFI for August 17th 2012. This report will look at the derivative and physical markets.

We start with comments on the paper market and the Shanghai to NW Europe route where there were no major changes to the curve from the previous week and trading activity continues to be muted as Europe remains in holiday mode. The back end of the curve saw a marginal fall in value, but nothing significant to trigger any trading activity. For the Shanghai US West Coast route and similar to that of the European curve, there were no major changes to the front months of the curve. However, we have seen a rise in value in the back end of the curve as a better rate recovery is expected to materialise on the Trans Pacific trade lane in 2013.

In the physical market and the Asia – Europe route, the 1st August rate increase was short lived, having only lasted a week or two, at the most. With rates softening in the spot market, a few carriers have announced a rate increase for the 1 Sept (some 7th Sept), either in the form of a Rate Restoration Initiative or General Rate Increase. Some carriers are still yet to announce an increase whilst others have extended their base rates until the end of September alongside an increase in Sept BAF. With the Eurozone on its knees and the injection of more capacity from this week’s launch of Evergreen / Hanjin’s new service, it will be wishful thinking for carriers to try and successfully push through another rate increase when demand is not moving. Carriers will want to cash on the rush before the upcoming Chinese national holiday in October, but until there is a fundamental reduction in capacity, then the carriers are as likely to succeed with a rate hikes as is the Eurozone is in coming to a resolution.

On the Transpacific route and contrary to the high capacity utilisation levels that carriers are suggesting, according to our sources in Asia, volume growth and this year’s peak season remains fragile. There is a small impetus driven by the looming end of school holidays, but consumers in the US still seem to be holding their breath , as witnessed in this week’s rate declines following the implementation of a rate increase at the start of the month.According to Customer Growth Partners, sales growth for top retailers in the US slowed to 3.4% in Q2 2012 vs. Q2 2011 and down from a 6.2% growth in Q1 2012. A number of the large retailers reported their quarterly results this week – Walmart (+2.2%), Sears Holdings (-2.9%), Kmart (-4.9%), Target (+3.1%), Home Depot (+2.6%) painting a mixed bag as to the consumer sentiment despite July retail sales reported a 0.8% increase. Whilst the growth outlook remains bleak, it is a much better picture than the Eurozone.

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