Carriers undercut each other, wiping out May 1 GRI rate gains

The Shanghai-Mediterranean routes followed close behind with a 22.6 per cent drop, to $776 per TEU. Rate levels in the Shanghai-east coast South America trade decreased by 19.3 per cent to $642 per TEU.

Anecdotal reports from liner agents and freight brokers suggest that significant contracted cargo has been pulled out of long-term service agreements by shippers and instead placed in the spot market, with operators undercutting each other to gain the business.

The swift disappearance of most of the freight rate hikes from the May 1 general rate increases "peak volumes about the degree of softness in the global market and the speed of freight rate erosion the carriers are experiencing", said Danish consultant SeaIntel Maritime Analysis.

Based on SCFI benchmark rates, shipping lines lost 72 per cent of the price improvements that they had achieved with the May 1 general rate increases, in just one week.

The cumulative rate gains across all nine SCFI index routes after the latest rises amounted to $1,090, but the losses last week came to $787.

SeaIntel warned that with the summer cargo peak season still several weeks off, carriers "cannot rely on volumes to support them over the coming months".

Substantial capacity reductions through service suspensions and lay-ups were required to lift vessel utilisation rates and to stabilise the freight market, the firm said.

But SeaIntel suspects liner operators will be more likely to continue "the game of capacity management primarily through blanked sailings with their resultant negative impact on supply chain stability".

Theo Asianshipper
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