The bellwether Shanghai Container Freight Index (SCFI) did not publish on Monday, due to the national holiday in China, but current sentiment suggests that ocean carriers will find their rates under pressure following the Golden Week break.
Last month, the Asia to North Europe component of the SCFI shed 21% to $735 per teu, while for Mediterranean ports there was a smaller decline of 15% to $767 per teu.
Anecdotal reports from The Loadstar’s sources refer to a “sharp dip” in load factors on the route in the two weeks leading up the national factory shutdown, from a peak season high of over 95% to below 90%.
The demand slowdown reinforces the strategy of carriers to axe more than 200,000 teu of headhaul capacity this month, including the 2M’s AE2/Swan loop.
Taking out a massive 11 westbound sailings is designed to “stop the spot rate rot”, but a decision by Maersk, MSC and CMA CGM to cut FAK rates has, arguably, negated the initiative.
The sliding spot rates will also put carrier negotiators on the back foot as they prepare for the first round of meetings with major contract customers to renew annual contracts.
Meanwhile, on the transpacific tradelane, the jury is still out on the impact on forward bookings of US retailers stocking up in advance of Trump trade tariff hikes on a vast range of consumer imports.
Significantly, utilisation levels on Asia to US sailings were maintained in the high 90s in the lead up to the Golden Week holiday and the demand surge propelled spot rates to highs of some $2,350 per 40ft for the US west coast and $3,500 for US east coast ports. This represents a year-on-year increase of 66% and 75% respectively.
But the rates currently enjoyed by transpacific carriers could be short-lived if demand weakens substantially this month. After a long run of successful GRIs, carriers have been obliged to row back on their last two rate hikes, cancelling both the mid-September and 1 October GRIs.
“As the China-US tariff war ratcheted up, many US importers stocked up in advance of the high-turnover Thanksgiving and Christmas seasons,” noted Freightos chief executive Zvi Schreiber.
Notwithstanding carrier concerns over the stability of freight rates on the two biggest liner trades, they are also facing considerable cost pressures....MORESpeaking of Shanghai, equities were up a bit after yesterday's tumble. From MarketWatch:
Nikkei slips, but Chinese stocks bounce back after Monday’s plunge
Hang Seng tries to avoid 6th straight day of losses
Asian markets were mixed in early trading Tuesday, with Chinese equities rising while Japanese stocks fell.
Japan’s Nikkei NIK, -1.17% dropped about 1%, though analysts said that was mostly a catch-up reaction to Monday’s widespread regional declines that took place while Japanese markets were closed for a holiday. Electronics were among the biggest decliners as concerns over U.S.-China trade tensions continue to grow and as the yen USDJPY, -0.17% has rebounded since Friday. Sharp 6753, -4.04% and Renesas 6723, -3.55% were down nearly 4% amid broad selling, with just two of the 33 Topix sectors — construction and real estate — logging gains shortly after the open. Financials have fallen less, with bond yields remaining up. The 10-year JGB was up a half-basis point at 0.15%.
Hong Kong’s Hang Seng Index HSI, +0.42% was up 0.5% as it tried to avoid its second six-day losing streak in a month. Tencent 0700, -0.40% hit fresh 15-month lows in dropping more than 0.5% in early trading, but recovered to positive territory. Meanwhile, automaker Geely 0175, -3.39% skidded 3% after its September sales report. But oil heavyweight CNOOC 0883, +3.89% climbed nearly 3%.
Chinese stocks were higher in early trading after yesterday’s wide 4% slides left indexes there near multiyear lows. The Shanghai Composite SHCOMP, +0.49% rose an early 0.3% while the smaller-cap Shenzhen Composite 399106, +0.14% climbed 0.4%. A bounce-back after Monday’s post-holiday slide wasn’t unexpected, but the key question is whether it’s sustainable. ...MORE
