Jul 07 2016
Analysts Predict Modest Rise in Container Freight Rates After Major Slump
WORLDWIDE – According to the latest Container Forecaster reportpublished by global shipping consultancy Drewry, container freight rates are forecast to rise modestly over the next 18 months from the all-time lows reached recently, though the slight increase will not be sufficient to rescue the industry from substantial losses in 2016. Whilst the box lines continue to amalgamate either through merger, takeover or signing up to alliance agreements all possible steps to reduce costs, slow steaming etc. may have already been taken.
Liner shipping has had a torrid time so far in 2016 with spot freight rate volatility reaching unprecedented levels, while unit industry income has fallen to record lows. There are distinct parallels between what is happening now and the depths of the 2008/09 global financial crisis. Drewry estimates that container carriers collectively signed away $10 billion in revenue in this year’s contract rate negotiations on the two main East-West trades. With annual Transpacific contract rates as low as $800 per 40ft to the US West Coast and $1,800 per 40ft to the US East Coast, carriers have done exactly what they did back in May 2009 in a desperate attempt to retain market share.
With first quarter headhaul load factors at around 90%, Drewry opines that there was no logical reason for carriers to sign so much revenue away in one fell swoop. While spot rates on the core trades have significantly improved after the July 1 General Rates Increases (GRIs), it is still too early to say if carriers have suddenly changed their approach to commercial pricing.
The recent decision by the G6 lines to take a weekly loop out of the Asia-North Europe trade is considered a positive move, but the analysts believe similarly pragmatic and pro-active measures will be necessary across other sick trades if recent improvements are to gain momentum. While the new alliance structures are bedding-in between now and April 2017, this work will take some time yet. Read more
Source: HANDY SHIPPING GUIDE