Subscribe to our free, weekly email newsletter!


Ocean Cargo: Weak rate structure for carriers to persist, say analysts

The container shipping industry is in dire need of a correction on the supply side, said analysts for Drewry Maritime Research in London this week
By Patrick Burnson, Executive Editor
July 07, 2011

The container shipping industry is in dire need of a correction on the supply side, said analysts for Drewry Maritime Research in London this week.

Analysts add that even the realization of a decent peak season demand surge this summer will not provide enough momentum to lift severely eroded freight rates in the key east-west trades.??

“Contrary to what happened in 2009, there is currently no common strategy or discipline among carriers to lay up ships to redress the supply/demand balance,”?said Neil Dekker, editor of Drewry’s Container Forecaster.

He said ocean carriers will find it a very challenging environment this year in which to make money, but there is a major difference between this year and the recession-ravaged 2009.

Other analysts have told LM that container rates have been sliding on all the major trading lanes since July 2010, with the exception of a small “hiccough” in last winter, as liner companies tried to push for implementation of general rates increases in a weakening market.

“The anticipated strong volume rebound following the Chinese Lunar New Year did not materialize, and that resulted in continued descending rates on most trading lanes,” said Peter Sand, an analyst with the Baltic and International Maritime Council (BIMCO) in Copenhagen.

Drewry is forecasting an 8.1 percent growth in global container traffic for 2011 and so, other than rising fuel costs, responsibility for the inability to run their business models profitably can only be laid at the feet of the carriers themselves, analysts contend.

Drewry noted that ocean carriers have continued to launch new services in the key east-west trade lanes, many of them also upgraded with the latest 13,000 twenty-foot equivalent units (TEU) giants delivered from South Korean yards.  But this has severely contributed to overcapacity with average load factors in the headhaul transpacific and Asia to Europe routes remaining at only 80-85 percent.??

In this environment, said analysts, freight rates have massively declined on the Asia to North Europe route where in some cases spot rates are not even covering quoted bunker surcharges of around $750 per teu.

Planned rate restoration programs have been postponed and there is little hope of carriers imposing meaningful peak season surcharges, Drewry analysts added.

For related articles click here.

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Working with research partner, The Economist Intelligence Unit, the IBM Institute for Business Value surveyed 1,023 global procurement executives from 41 countries in North America, Europe and Asia.

U.S. Carloads were down 7.8 percent annually at 259,544, and intermodal volume was off 15.7 percent for the week ending February 21 at 213,617 containers and trailers.

The Department of Transportation’s Bureau of Transportation Logistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement partners Canada and Mexico in December 2014 was up 5.4 percent annually at $95.8 billion. This marks the 11th straight month of annual increases, according to BTS officials.

While the volume decline was steep, there was numerous reasons behind it, including terminal congestion, protracted contract negotiations between the Pacific Maritime Association and the International Longshore and Warehouse Union, and other supply chain-related issues, according to POLA officials.

Truckload rates for the month of January, which measures truckload linehaul rates paid during the month, saw a 7.9 percent annual hike, and intermodal rates dropped 0.3 percent compared to January 2014, which the report pointed out marks the first annual intermodal pricing decline since December 2013.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA