The 10-year vessel agreement shared in between Maersk line and Mediterranean Shipping Company regarding trans-Atlantic and trans-Pacific trades is termed as 2M agreement. Recently, they modified this 2M agreement by following the other three alliances belong to east-west zones. AE9/Condor service is removed from the wing of Asia-North Europe menu due to diminishing demands and shipping rates in between Asia-Europe. Shanghai Containerized Freight Index (SCFI) belonging to Asia-Europe components dropped by 193 dollars per teu and 218 dollars per teu for North Europe and Mediterranean recorded this week. These losses followed from the previous week, recorded as 276 dollars and 240 dollars per teu. Asia-Europe general rates got increased from 1st August, which forced SCFI to give 400 dollars (it is more than a week gain of SCFI). It really indicates worse situation ahead for carriers. Due to low phase of the market, 8 percent of reduction is seen in China product exports compared to last year, recorded in the month of July. Recent container trade statistics recorded in June reveals the uniform downfall of ex-Asia volumes for the year 2014.
Low demands showed great impact on Asia-Europe shipping rates which declined by 7.6 percent i.e., 1,274,900 teu compared to last year. From last 4 months, continuous declination is seen in Asia exports to Europe, compared with previous annual records. Exports belonging to top eight Asian countries got declined by 7.9% compared to previous years whereas 8.5 percent decline is seen alone from China. OOCL with 1,000 dollars and CMA CGM with 950 dollars announced for GRIs, which will get active from 1st September, whereas, similar GRI hikes proposed by NYK and Hapag-Lloyd in the last week. As time passes, it would become difficult to obtain carrier anywhere based on 1,000 dollars rate increase which may nervous investors further.
CTS Freight Rate Index Dropped Below 50
Great drop out is seen in CTS Freight Rate Index compared to past six years. It is said by analysts that the Asia-Europe Freight Rate Index monitoring spot and contract freight rated dropped by 9 points and recorded as 47 which is below 50 for the first time since June 2009. Carrier’s business will be profitable if it fights efficient with fast changing demands, falling rates and fierce competition, said by Soren Skou, Chief Executive of Maersk. Although, he was in expectation of weak market continuation for some more time. He also said that they will adjust their network by reducing capacity, matching market demand. He announced to cut off the AE9/Condor loop from 14th September. In June, a great decline is recorded in the capacity of AE9/Condor service from 9,500 teu ships to 6,500 teu vessels which forced them to axe the service. The high amount of capacity is deployed on this route by MSC and Maersk. 9,500 teu is taken as a grant by MSC and Maersk, even though 11,000 teu and 13,000 teu vessel recorded in other weeks. Maersk Line estimated high growth in between Asia and Europe which forced them to admit more capacity ahead than actual demand. Overcapacity may sometimes ruin the better cargo service which made them to tap the Condor service. It is to see in future whether the decision of 2M to join rival alliances will leave the steady market or not, reducing acute freight rate volatility.