zoom Volatility in container shipping freight rates is expected to remain very high as long as over-capacity and carrier industry instability continue, according to shipping consultancy Drewry.Drewry’s Global Freight Rate Index, a weighted average of spot container freight rates across all major routes except intra-Asia, swung back in July by 13% to reach USD 1,403 per 40ft box. The global spot rate index had dropped to an all-time low of USD 1,113 per 40ft container in April.The 26% jump in the global rate index between April and July follows the recent tendency of ocean carriers to increase rates and to discontinue some unprofitable services on a number of routes.Among the North-South trades, dismally low rates on the Asia-West Africa and Asia-South Africa routes are registering signs of reversal, with the start of the peak season. Rates from Shanghai to Lagos increased by 11% between May and July. A major reversal from rock bottom rates was registered on the Asia- South America trade, after carriers reduced the number of weekly services to three since May, causing a 243% increase in rates during March-July.“At least on four of the 100+ routes monitored through the Container Freight Rate Insight platform, rates have bottomed out. In some cases, higher volumes generated by the peak season in Asia have contributed to the upwards correction of rates,” Drewry said.However, a number of major routes are still priced at rates which are 20-50% lower than the average of the last three years. These include the routes from both the US and Europe to Asia, the eastbound Transatlantic route and some intra-Asia routes.On those five routes, rates generally remain in the range of USD 500-1,000 per 40ft container, including Terminal Handling Charges at both ends. This means that the base ocean rate is often only USD 100-500 per 40ft container.“The bottoming out trend simply confirms that the earlier, extremely low rates were not sustainable, and that some carriers have changed their practices to reduce losses. But it does not mean that this is the beginning of a long upwards trend of rate increases, because chronic over-capacity has still not been addressed fully by the container shipping sector,” Drewry added.
U.S. stocks were falling on Tuesday as weak data out of Germany added to concerns about possible headwinds to corporate outlooks ahead of the start of earnings season.Adding to concerns, the International Monetary Fund cut its global economic growth forecasts for the third time this year, warning of weaker growth in core euro zone countries, Japan and big emerging markets like Brazil.German industrial output in August slid 4%, the biggest fall in 5-1/2 years, the report coming a day after a report showed industrial orders had their biggest monthly drop since 2009.“The German data is the catalyst of the day but this started long before that,” said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.“You are left facing this bad situation for investors of a weak global backdrop but the U.S. economy forcing the Fed to raise rates.” The president of the Federal Reserve Bank of New York, William Dudley, said on Monday he would be “delighted” to raise interest rates some time next year since it would be a sign of economic success, but for now a “very accommodative monetary policy” is still needed.The Dow Jones industrial average was falling 226.03 points to 16,16,765, the S&P 500 was losing 24.43 points to 1940.39 and the Nasdaq Composite was dropping 60.96 points to 4,393. Canada’s TSX index was down 157.Declining issues were outnumbering advancing ones on the NYSE by 1,971 to 1,009, for a 1.95-to-1 ratio on the downside; on the Nasdaq, 1,943 issues were falling and 722 advancing for a 2.69-to-1 ratio favoring decliners.The benchmark S&P 500 index was posting 8 new 52-week highs and 8 new lows; the Nasdaq Composite was recording 12 new highs and 154 new lows.© Thomson Reuters 2014