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Big ships depress rates, says Drewry

[ November 7, 2011   //   ]

Excess vessel capacity and carriers fighting for market share are pushing down world container rates, according to benchmarking company Drewry Maritime Research. Drewry said its Global Freight Rate Index, which excludes intra-Asia trades, fell 12% in September, the fourth consecutive month of falls in the index. Continuing weakness on East-West trades, particularly Asia-Europe, and cascading tonnage onto faster growing developing market trade routes dragged down the global average. The index of global spot rates has now lost over 35% of its value over the past 12 months.

Recent capacity withdrawals are having a more stabilising influence on rates on the transpacific, but the Asia-Europe trade remains severely over tonnaged as a result of an influx of newbuild ultra large container ship capacity (ULCS) with no alternative trade to go to.

Container Freight Rate Insight editor Martin Dixon said: “The characteristics of the transpacific and Asia-Europe trades are diverging. The removal of capacity from the former is proving sufficient to put a brake on further rate erosion. However, the absence of any such action on the Asia-Europe trade means that rates have further to fall.”

South Asia, South America, Oceania and intra-Asia trade lanes have been more resilient while Sub-Saharan African trades have bucked the trend with a strong rebound i
“Container shipping remains very much a buyer’s market with rich pickings for shippers coming into the annual contracting season,” continued Dixon. “Given faltering global demand, the level of overcapacity and carriers’ continued penchant for chasing market share, Drewry does not expect rates to recover notably in the near term.”

In fact, it expects container freight rates to remain volatile for some time to come, with a less predictable geopolitical and economic environment making it increasingly difficult for carriers to accurately match new build capacity to demand, so leading to more turbulence in the shipping cycle.