Europe-Asia container trade growth in percentage terms was higher this
year than on headhaul routes and led to an uplift in round-trip freight
The surge in backhaul volume early in the year was accompanied by a rise in Europe-Asia freight rates that reached a level similar to the rates recorded in 2011. By comparison, headhaul rates have declined steadily since 2012, according to SeaIntel.
The analyst said from a round-trip perspective, that meant the drop in freight rates has not been as severe as suggested by the typically reported headhaul rates, reported IHS Media.
"If we compare January-October 2017 to January-October 2016 we find that whereas the headhaul rates have increased 26 per cent, the effective round-trip rate has actually increased by 34 per cent, and hence indicate a quite solid development," according to SeaIntel.
Data from Container Trades Statistics (CTS) show the headhaul volume started to tail off in October after strong gains in the third quarter during the peak season. The 4.1 million TEU on Asia-Europe in the third quarter is six per cent higher than the volume carried in the same period of 2016. In October, however, volumes declined by 1.51 per cent year on year to 654,800 TEU.
"The impact of Golden Week is a bit of a surprise, but we would expect that we will end up with a growth rate in the four to 4.5 per cent range," CTS chief executive Rod Riseborough said regarding the full-year volume.
On the backhaul trade, the strong volume increase in the first quarter was followed by more moderate demand over the next six months with September falling into negative numbers year on year.
SeaIntel was cited as saying that the Asia-Europe trade has become marginally more balanced over the past six years. "When trade imbalances are growing, carriers are not quite able to maintain round-trip rates. The lower backhaul rates simply cannot be converted into proper compensatory increases on the headhaul," the analyst noted.
"On the other hand, as seen in Asia-Europe, in a stable or slightly improving environment with respect to trade imbalances this has a significantly positive effect on round-trip rates and hence carrier profitability."
SeaIntel CEO Alan Murphy pointed out the significant overcapacity on Asia-North Europe and Asia-Mediterranean means that carriers on each trade need to cancel 12 sailings before any kind of supply-demand balance can be achieved. So far carriers have withdrawn only a few sailings.
"Either they blank a lot of sailings in the first quarter or we will see freight rates drop to US$200 per TEU once again," he warned.
Alphaliner has also been highlighting weakening rates and their impact on 2017 profitability for container lines. "Carriers' inability to drive rates upwards during the seasonally stronger third quarter despite robust demand growth and continued rate weakness in October and November is expected to weigh down the earnings performance in the fourth quarter of the year," the analyst said.