Ocean contract freight rates on the major East-West trade routes saw another reduction in the last quarter of 2015, according to Drewry’s Benchmarking Club, a closed user group of multinational retailers and manufacturers who closely monitor their contract freight rates.
The Drewry Benchmarking Club Contract Rate Index, based on trans-Pacific and Asia-Europe contract freight rate data provided confidentially by shippers, declined by 5% between August and November last year, another fall on top of the sharp decline seen during the third quarter of 2015.
The reduction in contract rates was driven by a combination of lower fuel costs, excess vessel capacity, and intensive competition between shipping lines. Bunker costs fell notably from the fourth quarter of 2014, contributing to a reduction in contract rates negotiated over the course of last year.
The fall in the index between February and November 2015 was as much as 14%, a trend also reflected in the spot market.
Some of the fall in contract rates was the result of carriers granting shippers temporary reductions in contract rates to secure cargo. Drewry notes that a small number of shippers are using spot market rates for a proportion of their volumes.
“As expected, contract rates reduced further through the latter part of 2015, as the effect of falling fuel costs and continuing overcapacity weakened market rates,” said Philip Damas, director of Drewry Supply Chain Advisors.
Drewry in its latest “Container Forecaster” report said the container shipping industry may have seen freight rates eroded by as much as 9% in 2015, and this year is not expected to provide relief from this downward trend. It foresees not just faster freight rate reductions but also “industry-wide losses in 2016” as a result of the further widening of the supply-demand imbalance and insufficient measures to reduce ship capacity.
Meanwhile, rates for shipping containers on the Asia-Northern Europe trade lane reportedly fell by 24.4% to US$932 per 20-foot equivalent unit last week, according to a report by Reuters.
Photo: Buonasera
