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Container shipping rates bottomed out and forecast to rise
Thursday, 07 July 2016 16:17

Container freight rates are forecast to rise modestly over the next 18 months from a recently reached all-time low, Drewry has said.

However, the shipping consultancy warns that this will not be sufficient to rescue the industry from substantial losses in 2016, according to the company’s latest Container Forecaster report.

Drewry estimates that container carriers collectively “signed away” US$10 billion in revenue in this year’s contract rate negotiations on two main East-West trades. With annual Transpacific contract rates as low as US$800 per FEU to the US West Coast and US$1,800 per FEU to the US East Coast, “carriers have done exactly what they did back in May 2009 in a desperate attempt to retain market share,” Drewry said.

“With first quarter headhaul load factors at around 90 per cent, there was no logical reason for carriers to sign so much revenue away in one fell swoop,” the report continues. “While spot rates on the core trades have significantly improved after the July 1 GRIs, it is still too early to say if carriers have suddenly changed their approach to commercial pricing.”

The company believes pragmatic and pro-active measures will be necessary across “sick trades” if recent improvements are to gain momentum, such as the G6 lines decision to remove a weekly loop out of the Asia-North Europe trade.

“For 2017, Drewry anticipates a slightly brighter picture with global freight rates forecast to improve by about eight per cent,” Neil Dekker, Drewry’s director of container research said. “Carriers are expected to take some action to address overcapacity as cashflow attrition becomes more urgent and BCO (beneficial cargo owner) rates rise from this year’s lows. But once again, this cannot be seen as a genuine recovery since these so-called improvements must be set in context against the unnecessarily big rate declines seen in both 2015 and 2016."