Carriers struggle with low demand and high fuel costs

Sea freight spot rates ex-Asia to both North Europe and the Mediterranean have fallen again, prompting carriers into last-minute cancelled sailings, while they are being hit by a huge spike in fuel costs. 

Container shipping lines across the three alliances have announced additional blank sailings ex Asia to North Europe and the Mediterranean, around the Chinese Golden Week holiday in the first week of October, and through to the end of the month.

At the same time oil prices have surged to $90 a barrel, with December Brent Crude now priced at around $95, driven by OPEC’s supply cuts, which have been extended to the end of the year.

The price of Rotterdam-sourced industry-standard low-sulphur fuel (VLSFO) jumped on Friday by another $8 per ton to $643 and has now increased by 22% since the end of June.

The cancellation of multiple October sailings from Asia to Europe is an attempt by the carriers to push capacity below demand levels and raise rates, before the start of the slack season. 

If they fail, they may not have another opportunity to significantly raise prices before Chinese New Year, next February.

Hapag-Lloyd has cancelled sailings, which include the FE2, FE3 and FE4 loops to North Europe in week 40, while THEA partners have followed the lead of the 2M, and MSC’s standalone services, by radically cutting capacity on the Mediterranean lane between weeks 40 and 43

According to the latest reports in The Loadstar it is not clear whether THEA member HMM will blank any sailings of its Asia, India to Mediterranean standalone loop that launched in August.

The aggressive blanking announced by all three alliances means it may be challenging to find space for exports from China to Europe next month, which is why we recommend that you share shipping forecasts as early as possible, so we can reserve the space you need.

The Loadstar reported that there’s no real science in this, other than if shippers start to scramble for space, and cargo gets rolled, then rates go up.

Notwithstanding the impact of the mass blanking of sailings in October, there will also be the knock-on effect of limited export sailing from North Europe a month later.

“It looks like it could be a nightmare to find space out of Europe during November and December,” a contact told The Loadstar, which underlines again the importance of shipping forecasts.

Carriers will, of course, be looking to raise rates on backhaul trades as prices on North Europe-Asia are also touching new lows.

Our sea freight team works hard to keep our customers’ cargo moving, ensuring there is available capacity and offering alternative service options in the event of unforeseen blankings. 

In theory carriers have fuel cost mechanisms in place to adjust bunker surcharge amounts payable by shippers, but in practice some lines have waived increases over the past few weeks.

We are watching the situation closely, to keep our customers informed and protect their supply chains.

Providing us with regular forecasting, helps us to understand critical dates and intended volumes, so that we can secure the right amount of capacity to keep your supply chains running.