CCFI Commentary Issue 32, 2017

     Freight rate Slip under Competition

  China export box transport market has a good performance in the week ending Aug.4. Slot utilization rates in many routes almost 100%, but impacted by completion on cargo volume among box liners, freight rate fails to sustain at the level after rising, and the comprehensive index decreases. On Aug.4, Shanghai Export Containerized Freight Index (SCFI) issued by Shanghai Shipping Exchange (SSE) quotes 897.28 points, down by 3.0% from one week ago.

  According to European Statistics, economic sentiment index in euro zone quotes 111.2 points in July, higher than expectation. Benefited from the recovering economy in the destination, transport demand is boosted in the Europe route, where the average slot utilization rate sustains above 95%, with some even full-loaded. With the aim to expand market share, most box liners begin to reduce booking rate despite of the good condition of market, causing spot rate sliding. On Aug.4, freight rates in the routes from Shanghai to Europe and Mediterranean route (covering seaborne surcharges) quote USD935/TEU and USD859/TEU, down by 2.9% and 2.7% from one week ago respectively.

  The latest data issued by United States Department of Commerce shows that U.S. retail sales monthly rate slip for two consecutive weeks, which slows down the transport demand in the North America route. For the good expectation of market performance, part of box liners increase the launch of capacities, which expands the whole capacity in the market and makes the average slot utilization rate between 90%-100%. Owing to the uneven performances of space slot utilization among box liners, the spot rate tends to decrease as part of box liners decrease freight rate for the sake of market shares, despite small part of box liners follow increasing freight rate. On Aug.4, freight rate in the services from Shanghai to USWC and USEC (covering seaborne surcharges) quote 1661USD/FEU and USD2661/FEU, down by 1.5% and 0.9% against one week ago respectively.

  Transport demand is flat in the Persian Gulf route, where the whole capacity increases narrowly and the average slot utilization rate leaving off Shanghai Port hovers around 80%. For the excess of spaces supply, most box liners reduce freight rate, causing spot rate slip forcefully. On Aug.4, freight rate in the Shanghai-Persian Gulf route (covering seaborne surcharges) has a week-on-week decrease of 2.6% to USD672/TEU, a slip for seven consecutive weeks.

  Cargo volume keeps stable in the Australia/New Zealand route, where, as box liners control capacity, demand/supply condition improves and the average slot utilization rate amounts to around 90%, with some even 100%. As the market improves, freight rate rises firmly. On Aug.4, freight rate in the Shanghai-Australia/New Zealand route (covering seaborne surcharges) quotes USD504/TEU, slip by 1.8% from one week ago.

  Transport demand keeps hot in the South America route, where the average slot utilization rate remains above 95%, and some even full-loaded. However, as freight rate rises to the highest level since from late June, box liners compete on attracting cargo volume to improve operation performance, leading spot rate sliding repeatedly. On Aug.4, freight rate in the Shanghai-South America route (covering seaborne surcharges) quotes USD3100/TEU, having a week-on-week slip of 7.5%, a slip of 18.7% from the highest record.

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