Container outlook: Lunar New Year to boost spot rates

December slides in container spot rates could give way to higher rates on mainline trades, according to Maritime Strategies International, or MSI.

Carriers achieved success with GRIs and aggressive capacity management at the start of November, but spot rates then retreated.

“We expect Asia-Europe rates of $930/TEU [twenty-foot equivalent units] in January and trans-Pacific spot rates (weighted average USWC+USEC) of $1,860/FEU [forty-foot equivalent units],” said the analyst.

“Sentiment in the time charter market has slipped in recent weeks, although earnings remain broadly stable. The near-term outlook for most vessel benchmarks is muted, but a slow pipeline of vessel redeliveries should limit downside risk.”

According to MSI, demand growth on the Asia-Europe westbound trade was negative in September (-3.4% year-on-year). “With 10 months of data the Asia-U.S. eastbound trade is 0.5% higher year-to-date, and volumes shrank by -10.9% in October,” said the analyst.

“We expect a muted pace of expansion on the Asia-Europe headhaul in the coming quarters, although volume trends will be distorted by the timing of the Chinese New Year. Volumes will be higher in January and lower in February.”

Looking ahead, MSI forecasts growth of 2.0% on the Asia-Europe westbound in 2020, following growth in 2019 of 3.5%, and growth of -1.2% on the trans-Pacific eastbound in 2019 with Asia-U.S. growth of -2% partly offset by marginal positive growth to Canada.

“While risks are weighted to the upside, this will likely be a pace of growth that liner companies will find challenging to navigate given ULCS [ultra large container ship] deliveries to MSC, CMA CGM and HMM,” said the analyst. “Given both this factor and the impact of IMO 2020, the annual ‘relaunch’ of the alliances’ offerings in April could see lengthened rotations and increased ‘buffer’ time. Port connectivity could suffer.”