China-Europe container rates drop below $1,000

Spot rates for shipping containers from Shanghai to Europe have dropped below $1,000 per twenty-foot unit for the first time since March 2009 due to low volumes and fierce competition, shipping body BIMCO said. The global shipping industry recovered in 2010 from a disastrous 2009 when the economic slump hit world trade, cargo volumes and rates.
But freight rates have been under pressure for months partly due to excess capacity hitting the market. "The spot rate has been sliding since mid-2010, paused only for a short breather around the turn of the year," Copenhagen-based BIMCO said.
After another weekly drop in freight rates on this main trading lane, boxes are being shipped at $992 per twenty-foot equivalent unit (TEU), $27 per TEU lower than last week, BIMCO said in a statement. "Low volumes have triggered fierce competition on main trading lanes including Shanghai-Europe. Rate cuts are ongoing as liner companies struggle to fill their vessels," BIMCO analyst Peter Sand said in the statement.
Since the Shanghai-Europe spot rate increased by $59 per TEU on December 31, 2010, the rate has dropped by 29 percent on the continued downward trend, said BIMCO, which is an organisation of shipowners, brokers and agents. A rebound was expected after the end of the Chinese Lunar New Year in February, but that has not materialised, BIMCO said.
"Thus vessel capacity already in place to handle the growing volumes has developed into a toxic cocktail resulting in ongoing decreasing rates," it said. "As European and US consumers are still focusing more on savings and debt-reduction rather than on consuming more containerised goods from China, demand has hesitated to pick up significantly," BIMCO said.
But Sand said that the latest decrease was much smaller than the drops in the past five weeks, giving reason to believe that the slide could end in the coming weeks. "But we might go all the way into the peak-season in (the third quarter) before sustainable spot rate levels on Shanghai-Europe are back," Sand added.
Denmark's Maersk Line, a unit of A.P. Moller-Maersk, is the world's biggest container shipping company. Major listed rivals include China's COSCO, Korea's Hanjin Shipping and Taiwan's Evergreen Marine. Maersk Line Chief Executive Eivind Kolding told Reuters in an interview earlier this week that the company expects rates to recover in the second half of the second quarter.