Container shipping costs have sunk to the depths of the last freight rate trough at the end of 2011, but carriers are hoping to recover their profitability with a peak season rate hike in July.
Average global freight rates fell to a 17-month low in May, according to Drewry’s new online Container Freight Rate Insight. Drewry’s Global Freight Rate Index, a weighted average across all main trades excluding Intra-Asia, declined for the fourth consecutive month. It shed 9 percent in May to reach $1,882 per 40-foot container, its lowest level since December 2012.
While the bulk of the damage came from east-west routes, particularly westbound rates on the Asia-Europe trade lane, weak load factors led rates to weaken on other major trade routes as well.
For instance, spot rates from Far East Asia to East Coast South America dropped notably in May. Drewry’s South China-Brazil Freight Rate Benchmark fell 28 percent in May to $2,860 per 40-foot container, its lowest level since July 2009 in the midst of the last global recession. Carriers have been cascading larger ships onto this and other once fast-growing trades so as to reduce the capacity burden on the East-West trades.
Pricing also retreated on trades covering the Middle East and Indian Sub-continent, particularly on busier routes such as from China to the Middle East, and on export routes to Europe. Likewise, export rates from Asia to South Africa slipped in May, continuing their decline of April.
However, regional trades within Far East Asia bucked the downtrend experienced. Drewry’s Intra-Asia Freight Rate Index, which is an average of container freight rates on intra-Asia routes excluding South Asia and the Middle East, remained stable in May at $942 per 40-foot unit. However, even this represented the lowest level the index has reached since its inception in March 2011.
Carriers’ failure to match capacity to weak demand through wider use of slow steaming or laying up ships is costing them dearly. But a new concerted effort to lift rates is likely to meet with some success, said Drewry.
Eastbound trans-Pacific rates have held steady in the past two weeks, after losing some of the gains from May’s GRI. Drewry’s Hong Kong-Los Angeles Benchmark was unchanged last week at $1,957 per 40-foot box. Meanwhile, on the Asia-Mediterranean trade June’s GRI rise was holding steady. The World Container Index Shanghai-Genoa benchmark leaped $855 in the first week of the month to $2,268 per 40-foot container.
An early start to peak season and carrier determination to restore spot rates before shippers sought renegotiation of higher contract rates were the primary drivers. Shipping lines will be looking to do the same again with July’s GRI on the Asia-North Europe trade, said Drewry.
Photo: Jim Bahn
