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Far East Imports

Spot container freight rates between Asia and Europe are on track to lose ALL the gains from this month’s general rate increases, putting more pressure on annual contract negotiations.

Asia-North Europe contract rates, now being discussed, are in the region of just $350 per teu – a massive reduction on 2015 contract rates, although many of these were discounted in the second half of this year by lines desperate to hold onto cargo.

The $265 per teu drop in spot rates in the Shanghai-North Europe component of Shanghai Containerised Freight Index (SCFI) this week, to $409/teu, was the largest-ever fall (in percentage terms) at just under 40%.

Since the SCFI’s 2009 inception, falls of this magnitude have only occurred four times before this year.

Such large weekly rate declines have been exacerbated by forwarders providing quotes to shippers that have yet to be secured with a carrier, resulting in an added requirement to force the market down to meet the pre-arranged unsecured rate.

Nevertheless, some carriers, including Maersk Line, have indicated that they will not close on 12-month contracts at such a low base, preferring either shorter-term contracts or the spot market.

Traditionally, spot cargo was regarded as a top-up to contracted cargo when volumes were down and represented, at most, only 25% of a vessel’s utilisation. But in the past year these figures have changed dramatically. One carrier stated that on some voyages to North Europe the spot cargo bookings were accounting for over 52% of the load.

Shippers may find themselves unable to fix their business on an annual contract basis unless they are prepared to pay significantly more than the ‘market rate’ to their liner.