China Transport:Rates expected to pick up late-July

We expect Asia-Europe rates to pick up again by the end of July on the back of rebound in load factors.

    TSA’s recommendation for a USD600/FEU rate increase in August will be a potential boost to spot ratesnext month.

    CSCLwill setuplogistics information JV in Shenzhen, which marks another step towardexpandinginto logistics industry.

    What’s New

    Freight rates edged down. The Shanghai Containerized Freight Index (SCFI) slipped slightly by 1.8% WoW last week. Asia-Europe and Asia-Med rates werecomparatively weaker whereas transpacific rates weremore resilient. Also, performance of the medium-haul ratecontinuedto be mixed. Overall average freight rate is currently 0.9% higher YoY.

    Asia-Europe rates hit by capacity. Asia-Europe and Asia-Med markets continued to experience strong cargo momentum, but rates weredragged down by more capacity deployment. There wereseven containerships,withover 10,000TEU each,delivered in the first two weeks of July and load factor stayed at 90-95% last week (vs 90% level a week ago). Spot Asia-Europe rates dropped 5.5% WoW to USD1,230/TEU (vs USD1,302/TEU a week ago). For Asia-Med routes, load factor was at 90%, hence rates declined 5.2% WoW to USD1,486/TEU (vs USD1,567/TEU a week ago).

    Transpacific rates are comparatively stable. Asia-USWC load factor improved slightly to 85-90% on the back of higher cargo demand stimulated by strength in the US economy. Although capacity growth continued to be fast, the impact on rate is comparatively mild, with Asia-USWC spot rate edgingdown 2.2% WoW to USD1,783/FEU (vs USD1,824/FEU a week ago). Load factor for Asia-USEC routes stayed high at 95% last week, supporting a more stable market, with spot rate downa marginal 0.5% WoW to USD3,581/FEU (vs USD3,598/FEU a week ago).

    Medium-haul performance is still divergent.Persian Gulf market witnessed an improvement in capacity balancewith load factor risingto 90% (vs 85% a week ago). Spot Persian Gulf rate improved 3.8% WoW last week to USD946/TEU (vs USD911/TEU a week ago). Australia/New Zealand rates decreased 1.4% WoW to USD613/TEU (vs USD622/TEU a week ago).