It is said by the biggest freight forwarder of ocean named as Kuehne+Nagel that they have terminated about freight volumes of 120,000 teu from their business of freight services in between Europe and Asia due to decreased freight traffic in between them. Detlef Trefzger was the chief executive of KN freight forwarder. He said that by glancing at the third quarter results of our freight company, it is clear that the carrier cargo companies are not only the companies which is suffering from low freight rates. He said that the spot rates this week have declined further in between Asia and Europe, mainly due to the impact of decline recorded by Shanghai Containerised Freight Index (SCFI). It is known from a source that the volumes of cargo service belonging SCFI declined by 26 dollars per teu towards North Europe reaching a final value of 233 dollars. While for the Mediterranean base port, the decline observed was 49 dollars per teu, reporting a final value of 195 dollars per teu.
From these results, it is clear that there are further declines reported in between Asia and Mediterranean. While the rates have declined by 100 dollars per teu, according to the recent report, which is just the past reported a low record of 26 dollars for North Europe. By glancing at the records, it is clear that the North Europe has already reported all time low record, leading the cargo carriers to experience losses by offering the cargo services at low rates which are less than 200 dollars per 40 ft. It is reported that these rates are going to be valid for another two weeks till October 31st, 2015, making the shippers enjoy the low prices for some more time. It is announced by the carriers that the new GRIs are going to be introduced on November 1st, 2015 in between North Europe and Asia. The new GRIs are going to range from 750 dollars per teu to 1200 dollars per teu, which are going to be proposed by MOL and K-Line.
It is seen that the carriers have withdrawn about 170,000 teu of capacity from the past three months, for which they have cut the supply relevant to the capacity reduction and are thinking to improve the profits by the new GRI. It is crucial to carriers for forcing the rates to previous rates and at the same time maintaining negotiations with the shippers along with new contracts made with them for an annual period. Frankly speaking, the GRIs to be introduced in November should succeed. By observing the current situation, it is a difficult period for both shippers and carriers.
The main danger for these services is that they will be declined overnight by container services due to financial difficulty and at the same time causing disturbance to supply chains. Hapag-Lloyd IPO this week faced difficulties in carrier bottom lines due to declined rates of cargo services. This shows the impact of declined prices on profitability. But the carrier company has reported 175 million dollars profit in the first half of the year, despite the losses in three consecutive years. But during peak season months like in July and August, Hapag-Lloyd suffered from reporting noticeable profit with a net gain of 2.1 million Euros, reported in these two months as average value price per teu.