Ocean carriers in the red are predicted to encounter even more turbulent waters ahead as freight rates on the Asia-Europe trade lane continue to crumble, says Freight Investor Services (FIS).
This after rates on the key trade fell an additional US$181 last week to reach $518 per twenty foot equivalent unit (TEU).
“It’s clear that rates have collapsed after the July 1st GRI and could reach negative freight territory for the second time this year if they continue on their current trajectory,” said FIS in a new market analysis.
The latest declines came despite attempts by the three alliances—G6, Ocean Three, and 2M—to withdraw capacity, which has not been enough to offset weak cargo demand, with utilization rates reportedly still between 80% to 90%, noted the dry bulk freight brokerage and market intelligence service provider.
“At current levels carriers are unlikely to see anything more than a partial increase when their next planned GRI (general rate increase) comes into force from August 1st,” it added.
Importantly, as reported in previous weeks, this most recent withdrawal of capacity has not been mirrored by the 2M alliance of Maersk Line and MSC, raising questions as to whether those that have withdrawn capacity will do so again in the near future, at the risk of losing market share.
Year-to-date, the average rate on the NWE of $662 per TEU is 48% lower than the corresponding period a year earlier.
“On current projections not only will average freight rates on NWE be lower than 2014 but they could also be lower than those witnessed in 2011, landing another blow for those carriers already in financial difficulty,” predicts FIS.
Elsewhere rates to the United States West Coast fell an additional $105 to $1,175 per forty footer last week and are now 39% lower than where they were at the start of 2015. Additionally the comprehensive index fell to 593.20 points and is again within touching distance of its historical low of 556.72 points.
Photo: Mrehere
