Drewry forecasts 21% drop in East-West rates
Drewry Maritime Research is forecasting average east-west ocean freight rates will fall 20.8 percent this year from 2010 as the addition of ship capacity outpaces growth in demand, the Journal of Commerce reported.
“Carriers have got it wrong this year and there has been an unwelcome and very quick return to the massive freight rate volatility so loathed by the shipper community,” the London-based consulting firm said in its latest quarterly Container Forecaster.
Pricing for container shipping has been sliding this year while demand by retailers and manufacturers has grown only modestly, with concerns over pressures from faltering economies in the European Union and tepid economic growth in the United States cutting into consumer confidence.
Vessel overcapacity is so severe even a “decent” peak season will not provide enough momentum to lift deeply eroded freight rates in the key east-west trade lanes, Drewry said.
Drewry says “container operators will find it a very challenging environment this year in which to make money,” even though the London firm is forecasting 8.1 percent growth in global container traffic for 2011.
“Other than rising fuel costs, responsibility for the inability to run their business models profitably can only be laid at the feet of the carriers themselves,” the report says.
Unlike 2009, when demand dropped and carriers cut capacity to meet demand, shipping container lines have added services and capacity this year, leaving average load factors dropping to the 80-85 percent level in the headhaul trans-Pacific and Asia- Europe trade lanes.
Freight pricing has fallen so far on westbound Asia-North Europe trade that in some cases spot rates are not even covering quoted bunker surcharges of around $750 per 20-foot equivalent unit. “Planned rate restoration programs have been postponed and there is little hope of carriers imposing meaningful peak season surcharges,” Drewry says.
Carriers so far have not resorted to idling ships to address the supply-demand imbalance, the firm said. “The fact that many ships are just being recycled into other trade lanes is also merely transferring the pain elsewhere,” said Neil Dekker, editor of the Container Forecaster.
“Carriers have got it wrong this year and there has been an unwelcome and very quick return to the massive freight rate volatility so loathed by the shipper community,” the London-based consulting firm said in its latest quarterly Container Forecaster.
Pricing for container shipping has been sliding this year while demand by retailers and manufacturers has grown only modestly, with concerns over pressures from faltering economies in the European Union and tepid economic growth in the United States cutting into consumer confidence.
Vessel overcapacity is so severe even a “decent” peak season will not provide enough momentum to lift deeply eroded freight rates in the key east-west trade lanes, Drewry said.
Drewry says “container operators will find it a very challenging environment this year in which to make money,” even though the London firm is forecasting 8.1 percent growth in global container traffic for 2011.
“Other than rising fuel costs, responsibility for the inability to run their business models profitably can only be laid at the feet of the carriers themselves,” the report says.
Unlike 2009, when demand dropped and carriers cut capacity to meet demand, shipping container lines have added services and capacity this year, leaving average load factors dropping to the 80-85 percent level in the headhaul trans-Pacific and Asia- Europe trade lanes.
Freight pricing has fallen so far on westbound Asia-North Europe trade that in some cases spot rates are not even covering quoted bunker surcharges of around $750 per 20-foot equivalent unit. “Planned rate restoration programs have been postponed and there is little hope of carriers imposing meaningful peak season surcharges,” Drewry says.
Carriers so far have not resorted to idling ships to address the supply-demand imbalance, the firm said. “The fact that many ships are just being recycled into other trade lanes is also merely transferring the pain elsewhere,” said Neil Dekker, editor of the Container Forecaster.