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Maersk takes a tumble as rates increases by 167% per TEU

Maersk takes a tumble as rates increases by 167% per TEU

COPENHAGEN: Rates this week jumped a whopping 167% or $343 to $548 per TEU as carriers were finally able to implement a GRI on the battered Asia-North Europe trade.

Despite the increase, rates are still estimated to be below break-even levels and are 50% lower than the corresponding period last year. Year-to-date the figures reflect the weakness in the trade since the start of the 2015 with rates on average being recorded at $657 TEU, a decline of 48% compared to the same period a year earlier.

This year has explicitly shown how individually carriers are unable to control their revenue particularly on the commoditised east-west trades, which should be seen as alarm bells for investors and finance teams.

Given the tools now available to carriers investors might ask as to why more is not being done to protect income. Shippers looking to utilise tools such as Forward Freight Agreements are increasingly finding it frustrating that carriers more often than not are failing to enter into such agreements, despite the stability it could bring to carriers future cash flows.

Despite a slight uptick in recent days, since March this year Maersk has seen its share price drop a massive 24%, which has somewhat mirrored the recent collapse in freight rates. By comparison a rate of around $1,100 a TEU could have been achieved for the first three quarters of this year via FFAs. This would have allowed them to protect a proportion of their income from these horrific declines.