The cost of moving a container across the world's main trade lanes fell for a sixth consecutive week, according to the Break Freight Index, as a stream of newly built ships met cargo volumes that have barely grown since the spring. The composite fell 3.4 per cent to $1,812 per forty-foot container, its lowest level this year.
Carriers have cancelled more sailings to hold rates up, but not nearly enough to absorb the new capacity. Brokers now expect the slide to continue into the quiet months after the year-end peak.
The numbers this week
The composite has lost 19 per cent over the six weeks. Spot rates for short-notice bookings dropped faster than the longer-term contract rates we track, which fell 1.2 per cent. The gap between the two is the widest it has been since we began publishing the index, a sign that carriers are discounting to fill space on specific sailings rather than cutting their list prices.
"Everyone has a published rate and nobody pays it," said Hendrik Vos, a container broker at Wattenmeer Chartering in Hamburg. "I had three offers yesterday for the same Rotterdam sailing, and none of them matched the rate sheet."
Lane by lane
The week's moves on the lanes in the index, per forty-foot container:
- Asia to North Europe: down 5.2 per cent to $2,140, the steepest fall and the sixth straight decline.
- Asia to the Mediterranean: down 4.6 per cent to $2,390.
- Transpacific, to the US West Coast: down 2.8 per cent to $1,960.
- Transpacific, to the US East Coast: down 1.9 per cent to $2,870.
- Transatlantic, North Europe to the US: unchanged at $1,540.
- Intra-Asia: up 0.8 per cent to $410, the only lane in the index to rise.
The Europe-bound lanes are the softest because that is where the newest and largest ships go first. A 24,000-box vessel only fits a handful of routes, and carriers deploy new tonnage on the long Asia–Europe loops where the fuel savings are greatest.
Where the ships come from
The fleet is growing faster than trade. Ships ordered during the boom years are still leaving the yards, and Harrow Maritime Analytics, a London consultancy, estimates that deliveries this year will add around 8 per cent to global container capacity. Its forecast for cargo growth over the same period is closer to 3 per cent.
Scrapping has not closed the gap. Old ships are still earning enough to keep sailing, and owners who might have sold them for recycling are waiting for a better steel price. (We visited one of the yards that would take them in our report on ship recycling.)
Blank sailings help less
A blank sailing is a scheduled voyage that a carrier cancels, pulling a ship from the loop for a week. Our tracking counts 41 blank sailings announced for the next four weeks on the Asia–Europe and transpacific lanes, up from 29 a month ago.
That sounds like discipline. In practice, cancelled sailings mostly push cargo onto the next ship, which then sails full at a lower rate. "Blanking a sailing moves the problem by seven days," said Amara Nwosu, head of ocean procurement at a European furniture importer. "We just book the one after."
Who gains from cheap boxes
Shippers with flexible contracts are the clear winners. Nwosu's company has moved 40 per cent of its volume to index-linked contracts that reset every month. Forwarders who bought space in advance at higher rates are the losers, and several are now reselling it below cost.
Carriers still have cushions. Most locked in profitable contracts during the boom and are paying off newbuilds with money earned when a box to Europe cost several times what it does now. "Nobody is in trouble yet," Vos said. "They are just learning to live without the extra zero."
What would stop the slide
A floor under rates would take a disruption at a chokepoint that forces ships onto longer routes, or carriers laying up whole ships instead of cancelling single voyages. Neither looks imminent. Vos expects the composite to fall below $1,700 before the end of the year.
For the longer story of how the shortage turned into a glut, read our earlier analysis, The container glut has begun. The index is updated every week on the Markets desk.
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