Capacity cuts, price hikes lift Asia-Europe rates
Increasing spot rates on trade between Asia and Europe over the past two weeks show that ships are filling up and that the carrier approach of maintaining ability and increasing proposed rate levels has an impact.
According to the Shanghai Shipping Exchange's Shanghai Containerized Freight Index (SCFI), rates have increased nearly 17 percent since the last week of July (Week 30) and are presently at a five-month high of $806 per TEU.
The carrier's attempts to decrease ability are supporting the push to raise prices, with 150,000 TEUs being withdrawn from Asia-Europe sailing through July and August. The Ocean Alliance and THE Alliance's 10 blanked sailings (none from 2 M) arrive at a traditionally busy portion of the year, an indication of the high season's low airline expectations.
The continuing US-China trade negotiations continue to weigh on general sentiment, although the general manufacturing PMI of IHS Markit Caixin China improved significantly in July. According to the recent IHS Markit Eurozone production PMI, Eurozone production contraction accelerated at the other end of the Asia-Europe supply chain in July.
"The PMI dashboard in the Eurozone is a sea of red, with all lights warning of the region's producers ' declining health," said Chris Williamson, chief economist at IHS Markit. Williamson said forward indicators also deteriorated in July, with input sales falling to an extent that has not been seen since 2012 as short-term firms prepared for weaker manufacturing, and expectations fell to the lowest in more than six-and-a-half years for the year ahead. "Germany is leading the downturn, reflecting further deteriorating circumstances in the automotive industry and dropping worldwide demand for company machinery," he said.