Freight Facts Q1 2011

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THE PREMIER SOURCE FOR QUARTERLY FREIGHT RATES

BY MATTHEW BEDDOW

Q1 2011

PUBLISHED MAY 2011

GLOBAL OVERVIEW

During the first three months of the year and into the beginning of the second quarter ocean carriers

continued the rate war commenced in Q4 10. The root cause was the ongoing massive influx of

postponed super-post panamax vessels into the Asia-North Europe tradelane. Thirty two of the

giants were delivered between August and March alone, forcing ocean carriers to go hunting for

more CIF spot cargo in Asia.

Although only a small sector of the market rate reductions offered there eventually fell down to the



Comparison of ocean carrier’s rates and volumes between Q1 11 and Q4 10

Carrier Q1 11(USD/TEU)

Q4 10(USD/TEU)

% change Cargo Flow Q111 TEU x 1,000

%change

Hapag-

Lloyd

1,563 1,639 -4.6% 1,200 0.0%

Maersk 1,454 NA Negative 3,680 -3.2%

CSAV 1,599 1,855 -13.8% 877 4.5%

OOCL 1,126 1,165 -3.3% 1,181 -9.4%

Hanjin 1,302 1,402 -7.1% 945 -1.3%

APL 1,254 1,378 -9% 1,528 -7.9%

Source: carriers

This was enough to take CSAV, APL, Hanjin, Evergreen and CSCL into the red at either the operating

or net level. Others will probably follow, or not be far behind.

The rate reductions may not seem much, but it should be remembered that these rates are ‘all-in’

(ie inclusive of fuel surcharges), and significant rate increases were required just to pay for the rising

t f f l T bl 1 h h th i f f l i R tt d h d b t th t t



TRANSPACIFIC TRADELANE

According to the CCFI, the average all-in freight rate from China to the USWC fell from approximately

USD1,006/TEU in January to USD986/TEU in March, 2011. The averages in October, November and

December were around USD1,125, USD1,053 and USD1,014 respectively, which means that the fall

between October and March was 12.4% - ignoring the effect of increased fuel surcharges.

Full import cargo into Los Angeles and Long Beach, the barometer of transpacific trade levels, fell by

13% compared to Q4 10, to 1,578,833TEU, underlining the folly of ocean carriers not withdrawingenough vessel capacity during the winter season.

This is not a good foundation off which to renegotiate the many annual ocean freight agreements

due for renewal on May 1, 2011, which may explain why spot rates out of Shanghai recorded by the

Shanghai Containerized Freight Index (SCFI) started to rise in the last two weeks of April.

EUROPE/ASIA TRADELANE

As shown in table 1, ocean carriers’ average all-in freight rate from Asia to Europe in March 2011

further fell to 12% below the average for the whole of 2008, compared to 7% below in February and

4% below in January, according to Container Trade Statistics (C TS).

Drilling down into this in more detail, the average rate for dry cargo to northern Europe alone fell to

10% below the average for 2008 in March, compared to 5% below in February and 2% below in



TRANSATLANTIC TRADE

All-in prices from Europe to North America remained stable in the first quarter of the year according

to CTS (see table 1) despite cargo falling by 4% compared to the previous quarter, down to

775,300TEU. The average all-in freight rate for the period was between 13% and 14% below the

average for the whole of 2008, as in the previous quarter.

In more detail, the average for dry cargo from northern Europe to the US during the period was

between 5% and 6% below the average for 2008, compared to between 6% and 7% lower in Q4 10,

whereas from the Mediterranean it was a more substantial 23% to 26% lower, compared tobetween 24% and 27% below in Q4 10.

In the reverse direction, the average all-in eastbound rate from North America to Europe in Q1 11

remained between 5% and 6% above the average for 2008, compared to being between 6% and 8%

higher in Q4 10.

In more detail, the average rate on dry cargo from the US to northern Europe in Q1 11 was between

6% and 8% higher than the average for the whole of 2008, compared to being between 6% and 4%

higher in the previous quarter, whereas to the Mediterranean, it ranged from between being 0% and

2% higher, compared to 3% and 5% higher.

On the other hand, eastbound traffic to Europe rose by 5.3%, to 735,000TEU.



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Fig 1: World Liner Data all-in monthly freight rate changes compared to the average rate in each tradelane for 2008

Tradelane Sep-10

Oct-

10 Nov-10 Dec-10 Jan-11 Feb-11

Mar-

11

Asia to Europe 13% 8% 2% -3% -4% -7% -12%

Europe to Asia 6% 3% 0% -3% -7% -4% -3%

Europe to North America -15% -14% -14% -13% -13% -13% -14%

North America to Europe 8% 8% 7% 7% 6% 5% 5%

Europe to Western Asia* -9% -11% -10% -9% -10% -13% -14%

Western Asia to Europe -13% -14% -15% -17% -17% -16% -16%

Europe to South & Central America -5% 2% 5% 1% 1% 1% 2%South & Central America to Europe -13% -11% -12% -14% -13% -11% -9%

Europe to Australasia -3% 3% 1% -3% 0% 2% 2%

Australasia to Europe 1% -3% 0% 0% 0% 3% 3%

Europe to West Africa+ -18% -19% -43% -42% -41% -44% -34%

West Africa to Europe+ N/A N/A N/A N/A N/A N/A N/A

Bunker price in Rotterdam at beginning of each

month in 2009/10** 406 427 455 440 454 440 449

Bunker price in Rotterdam at beginning of each

month in 2010/11** 432 458 471 487 510 564 605

Notes: * Western Asia = Indian Subcontinent and Mid-East region, +Tenerife to Lobito.

** 380cst USD/tonne, provided by Cockett Marine Oil (USD/tonne)

Source: Container Trade Statistics

Freight Facts Q1 2011

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