Destructive rate war emerging on Asia-Europe box tradelane

Rates on the all important Asia to Europe box tradelane have slumped to lows not seen for nearly two years as carriers undercut each other in a dangerous battle for market share.

The Shanghai Containerized Freight Index (SCFI) closed last week on just $585 per teu, down 5.2% on the previous week. The index has shed more than $300 per teu since the start of the year.

Carriers have announced rate increases today.

“Whether these increases are successful or not will show in the coming week whether the rate war was a short-term spat in the traditional post-Chinese New Year market or whether it is a much more serious issue in which case the profitability for all of 2018 is in jeopardy,” Lars Jensen from SeaIntelligence Consulting wrote on LinkedIn.

Container rates always decline following Chinese New Year. However, the drop seen this year is much more severe. Last week’s SCFI spot rate decline means that rate levels are now 17% lower than what the seasonal developments can account for, according to SeaIntelligence data.

“The only way to accurately describe the data right now is as a re-kindling of the freight rate war on the Asia-Europe trade,” Jensen wrote.

Neil Dekker, a container analyst at ClipperMaritime, pointed to the slew of giant newbuilds entering the tradelane in recent months as one of the reasons for the fall in freight rates.

“Headhaul volumes have been very slow to gain traction after the Chinese New Year Holidays and with newbuilds being delivered to the Asia-North Europe trade at a rapid pace in the next few months, especially from Cosco, ocean carriers should be very wary of the low rate levels,” Dekker told Splash, adding: “Last week, the SCFI rates reached the lowest point since June 2016 when carriers were involved in a destructive rate war.”

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.


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