Demand push drives Asia-Europe rates to six-year highs
Published: 16/11/20
Spot rates from China to North Europe and the Mediterranean shot up this week to levels not seen since February 2014, with restocking expected to drive demand into early 2021.
The China-North Europe rate was up 21 percent sequentially this week to $1,508 per TEU, while the China-Med rate rose 23 percent to $1,674 per TEU, according to the Friday reading of the Shanghai Containerized Freight Index (SCFI).
Carriers expect the strong demand driving the rates to continue. Rolf Habben Jansen, CEO of Hapag-Lloyd, told analysts during Hapag-Lloyd’s third-quarter earnings call Friday that every available vessel in the carrier’s fleet has been deployed to handle the high demand. He said most volumes up to now have been driven by consumer demand rather than by companies restocking, but that would likely change.
“When the [COVID-19] crisis hit, a lot of people cut orders as soon as they could,” Habben Jansen said. “Then demand came back and a lot of people have not been able to restock, so that will be a positive factor when looking into 2021. People may also decide to have a little bit more safety stock in their supply chain.”
South Korean carrier HMM also highlighted restocking as a driver of demand, and said in a statement Friday that although the fourth quarter was the traditional slow season, inventory replenishment ahead of the year-end holidays and Chinese New Year would keep ships full.
Asia-Europe rate heads for record level
The size of the week-on-week spot market increases on the trades into Europe — $262 per TEU to North Europe and $310 per TEU to the Med — are outside the trend of steady, but relatively small, weekly increases, and have more in common with the rate spikes seen on the trans-Pacific.
“If the market strength continues, we could be in store for an Asia-Europe rate increase of $1,000 per TEU over the next two weeks, which would bring the SCFI rate to an all-time record, just as we have seen with the other deep-sea trades,” noted Lars Jensen, CEO and partner of SeaIntelligence Consulting.
A range of rate increases and surcharges are being implemented by some carriers to take advantage of the strong demand, and to recover the mounting costs of recovering and repositioning container equipment.
Hapag-Lloyd announced FAK rate levels on East Asia-Europe of $1,110 per TEU from Nov. 1, and increased the rate to $1,445 per TEU from Nov. 15. Zim Integrated Shipping Services will charge $1,850 from Shanghai to Haifa from Nov. 16. From Nov. 15, CMA CGM will increase its FAK rates on Asia-West Med to $1,450 per TEU, and $1,700 per TEU to the East Med. Also from Nov. 15, CMA CGM FAK rates from Asia to North Europe will increase to $1,400 per TEU.
On top of the rate increase, CMA CGM has also announced a $500 per TEU peak season surcharge from Asia to North Europe, and a $300 per TEU surcharge from Asia to the Med.
Source: www.joc.com
