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Asia-Europe Box Rate Drop Continues

Maritime Activity Reports, Inc.

December 18, 2015

Freight rates on world's busiest route down 20.6 pct; forward contracts indicate continued weak 2016 market.

Shipping freight rates for transporting containers from ports in Asia to Northern Europe plunged by 20.6 percent this week and there is nothing to indicate that shippers can expect better rates in 2016, a container derivatives trader said.

Freight rates for transporting 20-foot container (TEU) on the world's busiest route fell to $558 dollar from $703 a week earlier which is widely seen as a loss-making level.

"Sadly for the carriers, at least, 2016 doesn't look like it will be much better," said Richard Ward from brokerage firm Freight Investor Services.

He added that contract rates for transporting containers from Asia to Northern Europe in 2016 are reported at $600 per 40-foot container.

"There is no doubt this will put pressure on the spot market and any future rate increase attempts," Ward said.

In the week to Friday, container freight rates dropped 15.9 percent from Asia to ports in the Mediterranean, fell 5.9 percent to ports on the U.S. West Coast and were down 3.5 percent to ports on the U.S. East Coast.

The container shipping industry has been struggling as vessel capacity has outgrown the volume of goods for transport as a result of the global economic slowdown.

Over 90 percent of the world's trade is carried by sea but freight rates plunged to unprofitable levels for most carriers in 2015 as a result of the overcapacity.

"Development stresses container shipping companies are in a weak position when they negotiate rates with freight forwarders," analyst Jacob Pedersen from Sydbank said.

Pedersen said better discipline in setting prices and the idling of more vessels is needed to lift rates.

Last month Maersk Line, the global market leader with more than 600 container vessels and part of Danish oil and shipping group A.P. Moller-Maersk, reported a 61 percent drop in net profits in the third quarter.

By Ole Mikkelsen

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