New price war erupts on the Asia-Europe trade

The signs in recent weeks that container rates between Asia and Europe have been dropping are more than just ripples on the surface. According to Fearnley, the discipline that was created early in the year by the major container shipping companies is finally gone, and the price war is now raging yet again.

According to Rikard Vabo, chief analyst at Fearnley Securities, “Rates are dropping like a rock and the container shipping companies have run out of options for building their finances. It doesn’t look like they’ll be able to slow steam much more than they are doing now. The only solution would be a massive layup of tonnage, and I doubt they’ll be interested in doing something like that right now. It will probably take another rate pressure to get the shipping companies to react. So I find it hard to imagine that we won’t see another price war, which could end up as the factor that forces the shipping companies to rebalance the market.”

Undercutting to secure market share
The latest rates reported by forwarders in the European market confirm that the shipping companies are having more than a few difficulties maintaining the rate level they agreed upon over the spring. According to news agency Loadstar, a Hamburg-based forwarder says that several shipowners are undercutting each other in order to secure market shares. The price of a 40 ft container from Shanghai to Germany is now US$2,400 and a major UK forwarder has been offered a rate of US$2,200 for a 40 ft box.