Drewry: Container Shipping Rates Still Short of Previous Levels

2016-06-13

container shipping, Drewry, Spot Rates

Although container shipping spot rates should be more stable through the rest of the year, presuming carriers have ended their rate war, the average rates in 2016 are expected to be lower than last year, according to shipping consultancy Drewry.

In recent weeks there have been some large increases in spot rates in the major container lanes, particularly in the Asia to Europe trade.

This might suggest that all is now well for ocean carriers and that the profits will start to flow once more, however, such was the depths that spot rates fell to that any talk of recovery is premature, Drewry said.

Data gleamed from first-quarter 2016 carrier financial reports detail an intense rate war between the major carriers, where every one of them suffered severe freight rate decreases.

Maersk Line was at the forefront of the battle with a 26% drop in revenue per TEU that contributed to a 7% gain in volumes, while other carriers such as APL, Hanjin and K Line weren’t even compensated with larger volumes for their rate discounts.

“The predatory commercial strategies of the first quarter meant the rate decreases were more severe than they might otherwise have been,” Drewry said.

Following the heavy depreciation of spot rates in the first-quarter there is some evidence that carriers have called off the market share-driven rate war for now with Asia-Europe freight rates trending upwards since April, while Transpacific rates have stabilised. Ahead of the third-quarter peak season carriers have announced some capacity reductions in both lanes to give a push to their next general rate increases (GRI), some of which are as requesting as much as another USD 1,500 per TEU.

So far this year spot rates on the Shanghai to Rotterdam benchmark from the World Container Index have had three weeks of big increases of around USD 850/40ft container at the start of January, May and June only to see rates fall away immediately after.

“There is a long way to go before we can truly call a recovery in spot freight rates. As of 9 June, the year-to-date average of the headhaul WCI rates to Europe and the US are down by as much as 40% compared with full-year 2015 averages. The rate of depreciation is even steeper compared with 2014, which represents the high watermark for spot rates in the last five years,” Drewry added.

Source from : World Maritime News

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