Survival of the Un-Fittest

Maritime Activity Reports, Inc.

March 31, 2016

Graph: Drewry

Graph: Drewry

 Despite historically low rates carriers are unlikely to be killed off as creditors and governments will step in, says Drewry Shipping Consultants Limited.

 
Recent news stories, backed-up by anecdotal stories told to Drewry, report that carriers have quoted zero dollar freight rates to some forwarders on certain lanes out of Asia. 
 
Whether these are merely isolated cases or something more widespread is difficult to judge at the present time, but whatever the exact quantum there is no denying the container rates are now close to the historic lows as seen in 2009.
 
The World Container Index’s composite index, an average of spot freight rates on 11 global East-West routes connecting Asia, Europe and the US, reached a record low of $666 per 40-foot container on 24 March. 
 
This was the lowest reading since the World Container Index starting tracking weekly rates in June 2011 and means the index is now 60% lower than the average of the past five years, having decreased by about the same margin in the past 12 months.
 
The continued softening in the shipping market is good news for shippers’ cost budgets, but it does come with risks attached as the threat of carrier bankruptcy (potentially stranding cargo) increases the longer rates remain non-remunerative, while carriers will likely intensify practices such as void sailings in order to minimise the chance of that eventuality.
 
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