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 ·

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

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 [email protected]

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!

Latest Whitepaper
The View from the New “Single Window”
The single window, officially known as the "International Trade Data System," operates via the Customs and Border Protection (CBP) agency's Automated Commercial Environment (ACE) platform, and serves as a single point of contact for all trade filings.
Download Today!
From the March 2017 Issue
WMS vendors are stepping up to the plate and developing functionalities and solutions that meet the complex needs of today’s companies. Our top analysts take a peek into these developments and discuss the DC of the future and the software that will support it.
5 Supply Chain Trends Happening Now
2017 Warehouse/DC Equipment Survey: Investment up as service pressures rise
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2017 Trucking Regulations & Infrastructure Update
In this session our panel brings shippers up to date on the state of transportation regulations. Discussion will revolve around regulatory reform, aspects of the federal highway bill and what the transportation landscape looks like in the early days of the Trump administration.
Register Today!
EDITORS' PICKS
LM Exclusive: Major Modes Join E-commerce Mix
While last mile carriers receive much of the attention, the traditional modal heavyweights are in...
ASEAN Logistics: Building Collectively
While most of the world withdraws inward, Southeast Asia is practicing effective cooperation between...

2017 Rate Outlook: Will the pieces fall into place?
Trade and transport analysts see a turnaround in last year’s negative market outlook, but as...
Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...