Container box rates tumbled this week on head-haul routes, as the market kept navigating through the slack season.
The PBR1 North Asia to UK and North Continent route declined by $150 on the week to $1,050/FEU Friday, with some major carriers dropping their rates on the route below $1,000/FEU with end-November validity, in order to fill spare capacity.
“For certain carriers the price is the only instrument they have left,” said a source with a logistics company. “If you have low bookings and scheduling problems, you need to lower the price to keep the clients with you.”
The trend was reflected on the head-haul North American routes, where the PBR5 North Asia to East Coast America assessment gradually took a slide to $1,650/FEU by Friday from $1,800/FEU at the end of the previous week.
According to sources, some carriers had too much spare capacity with utilization still in the 80-85% range, and had to show competitive rates in order to fill it.
“The peak season demand has already been covered and the holidays in the US are upon us,” said a source with a carrier. “So I do not expect things to get better until December.”
Carriers with little extra capacity and utilization above 95% kept their offers in the $1,750-$1,850/FEU range at the start of the week, but with sentiment softening before the US offices closed for holidays on Thursday.
“Rates are already terribly low and dropping them further would mean outright losses,” said another carrier source.
In the meantime, the market is preparing for General Rate Increases for December. The initial offers for December are already indicating a jump of at least $200-250/FEU on most head-haul routes. However, industry sources don’t expect the higher box rates to stay firm for long.
“Considering that the peak season is over and retailers already stocked their shelves, we do not foresee any surges in demand,” said a source with a logistics company.
With demand expected to be flat in December, the initial rate increases are likely to gradually slip back to November levels by the middle of the month, sources said.
Source: Hellenic Shipping News.