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

The Institute for Supply Management’s (ISM) August edition of the Manufacturing Report on Business saw its PMI, the ISM’s index to measure growth, fall 1.6 percent to 51.1, following a 0.8 percent decline to 52.7 in July. Even with the relatively slow growth over the last two months, the PI has been at 50 or higher for 31 consecutive months.

Hackett observed in the new report that China’s economy has lost steam, with actual growth falling short of targeted rates, while the United States most recent second quarter GDP reading at 3.7 percent outpaced expected targets, even though it was negatively impacted by gains in manufacturing and retail inventories.

The proposed merger of Cosco and CSCL could spark further container consolidation

The average price dropped 4.7 cents to $2.514 per gallon, which now stands at the lowest weekly average price for diesel since July 2009, when it was at $2.542 the week of July 27, 2009, according to EIA data.

The Department of Transportation’s Bureau of Transportation Statistics (BTS) reported this week that U.S. trade with its North America Free Trade Agreement partners Canada and Mexico in June dropped 3.8 percent annually to $99.0 billion. This followed a 10.8 percent decline in May to $92.7 billion.

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