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            january 19, 2020

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CILF 2020

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IMO 2020 and void sailings to influence container shipping markets in Q4


Shippers and forwarders have expressed confusion over the timing and transparency of new charges implemented by container shipping lines as they switch to low-sulphur marine fuels and pass on higher costs to customers in the run up to the International Maritime Organization's (IMO) new sulphur cap that goes into effect on January 1, according to FreightWaves.
Shippers are also concerned that carriers might raise the fuel component of freight to offset bearish spot rates.
"As January 2020 looms, there is anecdotal evidence that shippers will bear increased bunker components of freight once the industry switches to cleaner fuels," a report from Maritime Strategies International (MSI) was cited as saying in a report by American Shipper.
"This is admittedly clearer on the transpacific trade, where the prevalence of annual contract arrangements provides better visibility than on other trade lanes including Asia-Europe, where annual contracts are less extensively used by shippers and forwarders."
Following recent spot rates losses on the main east-west tradelanes, analysts believe that further rate weakness is likely, even though it's anticipated that more sailings will be voided in the coming weeks. Some capacity also will be withdrawn as carriers equip vessels with scrubbers to avoid paying premiums for low sulphur fuels.
"In the most recent Shanghai Containerised Freight Index assessment, Asia-north Europe spot rates fell to US$593 per TEU and Asia-Mediterranean rates to $742/TEU, leaving north Europe rates 19 per cent lower than in 2018 and Mediterranean rates three per cent lower," said MSI.
CMA CGM plans to lower its published Asia-north Europe rates from mid-October by $200 per TEU, and other shipping lines are expected to also offer discounts.
Transpacific spot rates also fell during September after a brief uptick in late August. "Rates on both US west coast and US east coast trades sit 30-40 per cent lower on an annual basis," said MSI. "Carriers have responded with additional blanked sailings, with the 2M alliance partners the latest to cut capacity."
As a result, MSI's near-term outlook for spot rates on the major Asia-Europe and transpacific trades "remains weak", with the impact of significant blanked sailings considered "a key variable in the next several months".
MSI anticipates average Asia-Europe spot rates of will be $700 per TEU in November, however, an early lunar new year could boost rates towards the end of the fourth quarter.
On the transpacific trade, the picture is more complex due to the "confusing array of different drivers", including front-loading, new tariffs, old tariffs, seasonal patterns, inventory holdings and the lunar new year.
"Looking at the bigger picture, our view remains much the same," said the analyst. "Volume growth at the end of 2019 will be negative and likely significantly so to the US west coast."

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