Asia-Europe Container Rates at One-Year Low

Posted by Joseph Keefe October 10, 2014

Container freight rates fell 10.2 percent on busy route; Maersk expects gradually declining rates.

Freight rates for shipping containers from ports in Asia to Northern Europe fell 10.2 percent to $738 per 20-foot container (TEU) in the week ended on Friday, one source with access to data from the Shanghai Containerized Freight Index told Reuters.

It was the fourth consecutive week of falling freight rates on the world's busiest route and the rate is the lowest since Oct. 25 last year. Container freight rates have increased in 11 weeks this year but fallen in 29 weeks.

Nils Smedegaard Andersen, chief executive of A.P. Moller-Maersk which controls the world's biggest container shipping company, has warned that the industry will have to get used to gradually declining rates.

"Everyone is hoping for the opposite but they are unrealistic in my opinion," Smedegaard told Reuters at a shipping industry event in Copenhagen on Wednesday. "We will see gradually declining rates and it will continue to be a very tough business to be in."

Average rates for 2014 on the Asia-Europe route are $1,225 per TEU compared with $1,090 last year.

The index of four of the main routes from Asia fell 2.6 percent to $911.03 per TEU. Rates to ports in the Mediterranean fell 8.2 percent, while rates to the U.S. East and West coasts fell 1.0 percent and 2.0 percent respectively.

The current level for spot rates is widely seen as loss-making.

Several of the biggest container shipping companies have announced they intend to raise freight rates but they have had little success in making the increases stick.

"With the October general rate increase set to be a washout and rates currently well below break-even you can be sure that additional rate increases will be announced over the remaining months of the year," container derivatives trader Richard Ward from London based FIS wrote in a note to clients.

A.P. Moller-Maersk container shipping arm Maersk Line, the global market leader with nearly 600 container vessels, was one of the few in the sector to make a profit last year.

While the container shipping industry as a whole has struggled to make money in a market with too many vessels and too few goods to move, Maersk Line has improved earnings in the last seven quarters.

But the industry outlook remains tough.

"The coming quarters will be brutal with many new vessels coming to the market and a seasonally weaker market," said analyst Jacob Pedersen from Sydbank.

The Danish shipping company controls around one fifth of all containers transported from Asia to Europe.