Carriers Paying to Ship Customers' Boxes as Asia-Europe Freight Rates Fall Below Fuel Costs

Operators are now reportedly shipping at a loss, with box rates below what it costs to ship a container.

Container-freight rates on the Asia-to-Europe trade route have dropped below shipping companies' fuel costs for the first time in two years, The Wall Street Journal reports.

Based on data from the Shanghai Containerized Freight Index, at the end of last week the cost of shipping a container from Shanghai to Rotterdam fell to $243 per TEU, a 15 percent plunge from the previous week and less than the average per TEU fuel expense for an Asia-to-Europe sailing.

As the rate includes all surcharges including bunker adjustment factors (BAFs), and SeaIntel analysis putting the route's average BAF at around $300 per TEU, spot rates in real terms are at negative $56.

"We are now shipping at an absolute loss," said an executive from an Asian carrier.

"With the bunker-adjustment-factor surcharge at $300 for Asia-Europe, we are losing more than $50 per box."

The first time rates were at or below zero in real terms was in 2009, with negative rates also seen from September 2011 to February 2012, and during May and June, 2013, Lloyd's List Loading reports quoting analysis by SeaIntel chief executive Alan Murphy.

An all time low of $280 per TEU was seen in December 2011, Murphy added.

Industry executives and analysts had cited falling demand and the addition of new tonnage into the market as being behind the rate decline.

London-based Braemar ACM Shipbroking says that investment in ultra-large containerships (ULCSs) has translated into 500,000 containers in additional capacity in 2015's first quarter, representing nearly half the one million boxes contracted for all of 2014.

Earlier this week Ship & Bunker reported that Goldman Sachs attributed the weaker rates to a 37 percent year-on-year decline in bunker fuel prices.