Container rates to remain volatile this year, analysis predicts

Container shipping rates will remain volatile in the months ahead, with lines benefiting from better capacity management on Asia-Europe trades than on Transpacific and intra-Asia lanes, which will continue to suffer from the cascading of vessels, according to HSBC analysis.

HSBC’s latest Transport Indicator said the peak season would be “mixed” and characterised by “a divergence by route due to demand-supply dynamics”.

Despite recently weekly losses, this will see Asia-Europe freight rates remain at relatively high levels while Transpacific spot rates – which have slumped even though Transpacific Stabilization Agreement lines tried to enforce a general rate increase of $300 per 40-foot container on 15 May – are forecast to struggle.

TSA lines are hoping a $400 per FEU peak season surcharge (PSS) for all eastbound shipments, effective 15 June, will find more traction.

“We have seen increasing signs of a rebound in trade volume supported by a sharp rebound in one of our favourite lead indicators – PMI New orders minus inventory”, said HSBC. “Europe’s ‘New orders minus inventory’ index has also continued to increase.

“However, turnover at the recently concluded spring session of the Canton trade fair, which leads China’s exports by three to four months, dipped 2% from the previous session and 13% y-o-y, indicating a weak peak season ahead.

“And the recent build-up of inventory with retailers in the US also does not bode well for the upcoming peak season, in our view.”

Lines with the largest vessels able to maximise economies of scale on Asia-Europe trades and with decent exposure to the spot market will perform best in the coming months as carriers start co-operating more closely via alliances to reduce slot costs, according to HSBC.

“Key downside risks include: an increase in new orders for larger vessels, which could increase the oversupply and delay any recovery beyond 2015; a weaker-than-expected peak season; and higher-than-expected bunker costs could erode the industry’s profitability,” said the report.

Ongoing US west coast longshore labour contract negotiations were also overhanging the sector, said HSBC.

The current deal between unions and port representatives comes to an end on 30 June and many shippers fear strikes or lockouts that would force cargo diversions to the east coast or Canada.