The latest Drury World Container Index (WCI) global composite rate fell 10 per cent week on week to $2,795 per 40ft, a level close to last April, when the early peak season for Asia-Europe trade pushed up spot rates. While it is too early to tell if there will be a repeat of last year's situation, demand is low and sentiment is similar at the same time last year.

Last week was a tough one for trans-Pacific shipping lines. Spot freight rates in the East and West of the United States fell by double digits, and the decline was greater than that of the Asia-Europe route for the first time. Specifically, the WCI on the Shanghai-Los Angeles route fell 11 per cent month-on-month to $3,888 per 40ft; The Shanghai-New York route fell 13 percent to $5,126 per 40 feet. According to Chinese sources, shipping companies are increasingly competing for freight on this route, which has led to the reduction of spot freight rates, partly because factory production in some areas has not fully resumed after the Spring Festival, and cargo volumes are limited, so liner companies are reducing freight rates to attract cargo volumes.

Meanwhile, on the Asia-Europe route, the WCI rate on the Shanghai-Rotterdam route dropped 9% weekly to $2,618 per 40 feet; The Shanghai-Genoa route fell 8 percent to $3,837 per 40 feet. Ningbo sources said that the overall market transportation demand is slowly recovering, but the volume of goods is not enough to maintain a high loading rate, resulting in a continuous decline in freight costs.

In order to reverse the low price trend, shipping companies have been raising GRI since early March. Hapag-lloyd, for example, announced FAK rates of $4,100 per 40 feet on Asia-to-Northern Europe routes and $5,300 per 40 feet on Mediterranean routes starting March 1. MSC also announced a new FAK rate of $5,200 per 40 feet for shipments from Asia to the Western Mediterranean, also effective March 1.

However, Mr Delury warned that to balance supply and demand, shipping companies might need to cut capacity further as well as raise prices. Otherwise, rates are expected to continue to fall. Analysts said the surge in capacity would put further pressure on rates as March approached, which could reduce the chances of successful speculative general rate increases announced by shipping lines from March 1.

In addition, once the alliance restructuring is completed, the actual capacity of shippers on the Asia-Europe route will be concerned. Evidence emerged this week that capacity on routes from Asia to Northern Europe could fall by as much as 11 per cent year on year once new ship sharing deals are agreed, further affecting freight rates.