Stepping In Time With Mainlane Container Freight Rates


Spot container freight rates on the mainlane trades recorded sharp declines in 2015, before appearing to ‘bottom out’ in the middle of 2016. Rates have retained their volatility since then but in the main are still substantially above average full year 2016 levels. What have been the drivers behind this step-by-step progress in the box freight market?

A Not-So-Merry Dance

The key mainlane trades (the Far East-Europe and the Transpacific) play a crucial role in container shipping, providing deployment opportunities for the largest ship types, a major share of revenue for the leading global liner companies and accounting for a significant share of global box trade (an estimated 26% in 2016). In 2015 and into early 2016 these trade lanes were a major cause of distress for the container shipping sector, with freight rates there sliding precipitously (see graph). In Mar-16 the westbound Far East-Europe freight index stood at 13 points, down 81% from 70 points in Jan-15 whilst the eastbound Transpacific freight index stood at 34 points in Jun-16, down 63% from 91 points in Jan-15. This took place against a background of sluggish western economic growth, with peak leg Far East-Europe trade shrinking by 3% in 2015 also influenced by apparent inventory destocking. At the same time, the ongoing addition of very large boxships placed increasing pressure on the mainlanes, with 1.4m TEU of capacity on 12,000+ TEU boxships delivered in 2014-15. Benefits from falling fuel prices and lower unit costs on the new mega-ships appeared to largely be passed on to shippers whilst further pressure on rates resulted from liner companies targeting high utilisation on their newest assets.

A Better Rhythm

However, in 1H 2016, though they remained volatile, mainlane freight rates appeared to ‘bottom out’. The high-profile collapse of Hanjin in late August, whilst testament to the hitherto difficult conditions, removed some capacity from the market, and operators began to successfully engineer careful management of active tonnage. This led to gradual improvements on both key mainlanes. Following the historical low quarterly average of 25 points in Q1 16, the westbound Far East-Europe rate index improved to 55 points in Jul-16. The eastbound Transpacific index rose 111% from 34 points in Jun-16 to 71 points in Nov-16.

Keep Dancing…

In 2017 so far, mainlane freight rates have remained volatile, with a little ground lost overall. However, in general rate levels have been maintained at improved levels substantially above 2016 averages. In Q1 17, the westbound Far East-Europe rate index averaged 55, up 37% compared to full year 2016. The eastbound Transpacific index averaged 72 points, up 45% on the same basis.

Best Foot Forwards?

So, mainlane freight rates have seen dramatic ups and downs. From today’s improved levels, further progress will be hard won, with risks on the demand side and continued challenges from the delivery of new capacity. But right now, liner companies will be enjoying the music quite a bit more than in recent years.


Source: Clarksons



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