CCFI Commentary Issue 02, 2011

Weekly Report of China Export Container Transport Market
(CCFI Commentary in Issue 02, 2011)

This week, the demand of China’s containerized transport market saw upward, as the strong shipment on the Europe and America services curbed the slumping freight rate. On 2010 December 31st, the China Containerized Freight Index issued by Shanghai Shipping Exchange reported 1053.93 points, almost no change with last week; while the Shanghai Containerized Freight Index reported 1122.68 points, with an week-on-week increase of 3.7%.

Europe service entered its annual final stage this week, where the cargo volume sharply raised, pushing the slot utilization to 100%; whereas Mediterranean service was relatively weaker than the Europe service as the growth of the shipment exporting to North Africa showed lackluster, but still the cargo volume kept the rising trajectory with the slot utilization having climbed to 95%. Some of the carriers managed to restore the freight rate on January 1st 2011, bounding up the price of slot reservation for the first time after the 10 Q4. On December 31st, the freight rates (ocean freight plus surcharges) for the voyages from Shanghai to base ports in Europe and Mediterranean services nailed at USD 1401/TEU and USD 1250/TEU, respectively up 4.4% and 1.2%.

In North America service, the cargo volume kept the mounting momentum and sustained the slot utilization to above 95%. Considering the growing cargo volume, carriers were poised to upraise the freight rate, and some of them had already done that. On 2010 December 31st, the freight rates (ocean freight plus surcharges) for the voyages from Shanghai to base ports in US east coast and US west coast quoted USD 1962/FEU and USD 3169/FEU, both of which increased more than USD 100/FEU. Seasonal factors substantially boosted the demand of the capacity. The indices, however, which demonstrate the US economic consuming power was quite mixed, with the December retail sales increased and consumer confidence index dropped compared to the previous month. As a result, the short-term market on the North America service remains unclear. Besides, it was rumored that carriers drastically diverged about the range of the peak season surcharge, ranging from USD 200/FEU ~ USD 400/TEU. Moreover, some of them probably delay the PPS to 2011 January 15th.

The prevailing rate restoration on the main west-east services like Europe and Mediterranean had encouraged most carriers on other services to follow the step, where several liner operators announced to hike the rate with various degrees in January on West Africa, South Africa and Persian Gulf services.

In Australia and Singapore services the cargo volume showed steady, so did the freight rate, where the slot utilization for most voyages averaged about 90%. With the huge capacity and the limited cargo resources mostly emerging on the service over the past year, the surplus capacity seems hopeless to alleviate, so people are cautious about next year. Recently, members of the Asia Australia Discussion Agreement announced to gradually cut the capacity on the Far East/Australia service since the end of January to June. Such extensive and durative adjustment may widely influent next year’s market, as some carriers had declared to uplift the freight rate at January 15th by about USD 250/TEU.

On Japan service, the cargo volume were perceived obviously sluggish, for the figure shrunk by 30% from last week and the slot utilization saw no more than 50%. On December 31st, the freight index of the Japan service issued by SSE reported 739.38 points.