Falling Spot Freight Rates Could Hit Maersk's Planned Fee Changes

By MarEx 2013-10-18 15:21:00

A further drop in freight rates this week could force Maersk and other shipping companies to renegotiate planned hikes in container rates on routes from Asia to northern Europe next month.

Maersk Line, the world's biggest container shipping company and part of oil and shipping group A.P. Moller-Maersk , has said it will attempt to hike rates on routes from Asia to Northern Europe by $950 per TEU with effect from Nov. 1, a 144 percent increase if successful.

Such attempts are not uncommon in the industry, but are seen as a base for negotiation and the announced hikes rarely go through at planned levels.

With spot freights rates falling to a 17-month low this week, shippers may now have to adjust their rate hike plans. The Shanghai Containerized Freight Index showed rates on routes from Asia to Northern Europe had fallen to $661 per 20-foot container (TEU), compared with an average level of $1,378 in 2012, and to levels which are considered loss-making for most shipping companies.

"The main problem is overcapacity and I expect rates to continue to trickle until the beginning of November," said head of maritime analysis company SeaIntel, Lars Jensen.

Jensen said he did not expect the announced rates would be fully accepted by customers, but that Maersk Line would likely succeed in raising rates enough to exceed the break-even level of around $1,000-$1,100 per 20-foot container on the Asia to Europe route.

"They will get a good portion of the announced price hike through, but I do not expect it will go 100 percent," Jensen said.

According to data from the Shanghai Shipping Exchange on Friday, spot rates for container shipping on the Asia to Northern Europe route have fallen 2.1 percent this week.

Maersk Line is the biggest container shipping operator with nearly 600 container vessels, competing with lines such as Israel Corporation -controlled Zim Lines, Chinese Orient Overseas Container Line, Korean Hanjin Shipping and German-based Hapag-Lloyd.

Maersk's competitors have announced they will attempt to raise rates by between $950 and $1,000 per TEU, also from November. 

Copyright Reuters 2013.

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