Container Carrier Rate Wars Intensify

Maritime Activity Reports, Inc.

May 5, 2013

Ocean carriers cannot afford to operate services from Asia to Europe at rates which are between 25% and 30% lower than in January, says Drewry.

Although the recent collapse of rates was excessive, it will not be reversed until carriers withdraw at least two more loops to North Europe – preferably before the peak season, considers Drewry in its latest edition of 'Container Insight'.

Last week’s dramatic escalation of the rate war between Asia and Europe appears to have been partly triggered by ocean carrier concerns over future cargo volumes, not just declining load factors. According to the IMF’s latest prediction two weeks ago, the Eurozone’s economy will now decline by 0.3% in 2013 instead of the 0.1% fall previously forecast, and the UK’s will grow by only 0.7% instead of 1%.

This means that overall cargo growth to Europe is less likely, which puts ocean carriers in a precarious position. According to Drewry’s latest analysis of the this year’s newbuild programme, there were still 38 out of 45 vessels over 10,000 teu due for delivery at the beginning of April. Assuming these replace remaining 8,000-9,000 teu vessels still operating between Asia and Northern Europe, effective westbound capacity will be increased by over 5%.

The fact that some carriers have been discounting rates heavily is partly understandable, therefore. That said, says the report, the carriers were clearly agitated before for other non supply-demand related reasons, as evidenced by the decline in rates since January, so the IMF’s news probably only poured petrol onto the fire.

Source: Drewry

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