The early market momentum have weakened after freight rates faltered last week, with sharp declines in rates to South America, Oceania and the Middle East. Rates from China to Mexico have recorded the sharpest declines after dropping by more than 65% since early September. Carriers are also rolling back the rate hikes on the Asia-Europe and transpacific routes following China’s decision to remove value added tax rebates from 1 April for several key export products including solar panels to ease global trade tensions.
Carriers earnings are already coming under pressure, with average CCFI rates falling sequentially by 11% in the 4th quarter despite a mini rate rally in December. ONE, Maersk and Hapag-Lloyd are expected to continue to lag behind the rest of the market with EBIT margins potentially slipping into the red. A further delay in the return of containerships to the Suez route could be the only positive news for carriers this year. CMA CGM’s decision to redirect some of its ships back to the Suez only reduced overall Cape diversions by less than 2% in the last 3 weeks.
Johnson Leung
Return to Suez have negligible impact on Cape diversions for now
The total containership fleet shifted to the Cape route dropped marginally in the last 3 weeks following CMA CGM’s reassignment of 6 voyages back to the Suez and a single test voyage by Maersk. However, the impact on effective supply remains substantially unchanged with 330 voyages representing 6.1% of the fleet still absorbed by the Cape diversions. The time-table for a full return to the Suez remains clouded as the current unrest in Iran could trigger an escalation in Middle East tensions that would delay rather than hasten a return of containerships to the Red Sea.
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