Container Freight Rates Gain

(Press Release)
Thursday, January 12, 2012
A short-lived revival in rates still means rich pickings for shippers coming into the transpacific contracting season, but beware the capacity crunch to come.
 
Shippers should not lose sleep over the recent, short-lived jump in spot rates, but ought instead focus on ways to mitigate the risk of another sudden capacity crunch later in the year, urges Drewry Maritime Research. Freight rates on east-west trades have been in the ascendency of late. Drewry's Hong Kong - Los Angeles container rate benchmark, as published in the Container Freight Rate Insight, leapt 28% in the first week of the year. The benchmark rose $396 to $1,832 per feu and successfully sustained this level into the second week. Transpacific Stabilisation Agreement (TSA) carriers have been successful in forcing through their intended $400 per 40ft container rate increases.
Shipping lines have had similar success on the Asia-Europe trade. The World Container Index (WCI) benchmark rate between Shanghai and Rotterdam soared 41% in the first two weeks of January to $1,335 per feu. The increase of $391 per feu was in line with carriers’ intended peak season surcharge (PSS) of $400 per feu. The WCI is a joint venture between Drewry and exchange specialist Cleartrade. Buoyant shipping volumes in advance of Lunar New Year factory closures in Asia have filled ships to bursting, causing most carriers to roll containers. Some shipping lines have reported load factors in excess of 100%, so emboldening aggressive rate hikes.
“However, the big question on everyone’s minds is how sustained the rates revival will prove and what this means for 2012 transpacific contract rates?” asked Martin Dixon, research manager of Drewry’s Container Freight Rate Insight. “Once the pre-Chinese New Year rush recedes later this month spot rates will retreat back to December levels, unless carriers take action to remove surplus capacity from the trade. Shippers would be well advised to wait a few weeks before commencing contract negotiations.”
Most transpacific freight contracts run from May to April. In 2011 shippers and carriers settled at contract rates at or below the previous year’s level. However, this year shippers can expect to secure much lower shipping costs given the weak state of the container shipping market. 
For instance, Drewry’s Hong Kong - Los Angeles container rate benchmark had declined 27% between the first week of May and the end of 2011. The spot market is often a strong lead indicator of prevailing contract rates.
“However, shippers should beware,” cautioned Dixon. “Locking carriers into low freight rates today may hinder surety of supply in the future.” 
Drewry expects freight rates to rise sharply in the second half of the year as cash-burn forces carriers to slash capacity.
“A repeat of 2010 seems inevitable, when freight rates rose and space availability was highly restricted,” added Dixon. “Drewry strongly recommends shippers look at the benefits of index-linked contracts to mitigate these dangers.”
Prior to the recent bounce in pricing, east-west freight rates had been in free fall. Drewry’s East-West Freight Rate Index, a weighted average across key Asia-Europe, transpacific and transatlantic trade routes, had declined 38% in the 12 months to November 2011. However, other indices published in Drewry’s Container Freight Rate Insight suggest that some regions of the world have proved more stable than others. For instance, Drewry’s Intra-Asia Freight Rate Index lost just 6% through 2011 and gained 4% in the four months to November 2011. “Few trades can claim this level of sustained stability,” observed Dixon. “Despite cascading tonnage from other overburdened trades, rates on Asian regional trades have remained remarkably stable thanks to burgeoning traffic growth.”
Maritime Reporter September 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Finance

Nordic American Offshore Declares Dividend

Nordic American Offshore Ltd. today announced that its board of directors has declared a dividend of $0.45 per common share for the third quarter 2014. This is the same as for the second quarter 2014.

Bollore Africa Logistics Sees Profit Plunge in H1

First half 2014 profit at shipping company Bollore Africa Logistics plunged to 5.89 billion CFA francs ($11.48 million) from 9.45 billion CFA francs in the same period last year,

Maduro Says Venezuela's 2015 Budget to Put Oil at $60

Venezuela's 2015 budget will be based on a target oil price of $60 dollars per barrel, President Nicolas Maduro said on Friday night, but he repeated expectations that prices will recover.

Container Ships

CMA CGM Acquires 7,000 Reefer Containers

The CMA CGM Group announced it has acquired more than 7,000 of last generation 40’ High Cube Reefer containers including 6,000 low consumption engines. The CMA

'New Tango' Brings More Post-Panamax Ships to Charleston

New service expands Port of Charleston's capacity to serve North-South trade The SC Ports Authority today received the first ship call of a new consolidated

Video: E-Class Edith Mærsk on the Thames

The largest ship ever to enter the Thames arrived at DP World London Gateway, the U.K.’s new deepwater container port. The 397-meter-long, 56-meter-wide Edith Mærsk

 
 
Maritime Contracts Maritime Security Maritime Standards Offshore Oil Pod Propulsion Salvage Ship Electronics Ship Repair Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1918 sec (5 req/sec)