Drewry: Freight rates expected to rise in 2012 ahead of capacity shortage
THE recent surge in spot rates is not expected to last and shippers would be advised to find ways to mitigate the risk of sudden capacity shortage later this year, says London's Drewry Maritime Research. Saturday, 14.Jan.2012, 01:29 (GMT+3)
THE recent surge in spot rates is not expected to last and shippers would be advised to find ways to mitigate the risk of sudden capacity shortage later this year, says London's Drewry Maritime Research.
East-west freight rates have been in rising with the Hong Kong-Los Angeles container rate benchmark in its Drewry's Container Freight Rate Insight, soared 28 per cent in the first week of the year. The benchmark increased by US$396 to US$1,832 per FEU and remained there another week.
A report by New York's MarineLink.com also noted that shipping lines participating in the Transpacific Stabilisation Agreement (TSA) have been successfully increasing rates per FEU.
The same has been seen on the Asia-Europe trade. The World Container Index (WCI) benchmark rate between Shanghai and Rotterdam skyrocketed by 41 per cent in the first two weeks of January to $1,335 per FEU. It said the $391 per FEU increase was in line with carriers' intended peak season surcharge (PSS) of $400 per FEU.
Drewry's East-West Freight Rate Index fell 38 per cent in the 12 months to November 2011. Against that, other regions performed better with the Intra-Asia Freight Rate Index shedding just six per cent for the whole year, gaining four per cent in the four months to November 2011.
Drewry analysts also highlighted that greater shipping volumes in the run-up to Chinese New Year have filled vessels to bursting, inducing most ocean liners to roll over boxes. Some carriers have reported load factors in excess of 100 per cent, adding further momentum to hiking rates.
"The big question on everyone's mind is how sustained the rates revival will prove and what this means for 2012 transpacific contract rates?" said Martin Dixon, research manager of Drewry's Container Freight Rate Insight.
"Once the pre-Chinese New Year rush recedes later this month spot rates will retreat back to December levels, unless carriers take action to remove surplus capacity from the trade. Shippers would be well advised to wait a few weeks before commencing contract negotiations."
Transpacific freight contracts usually cover the year from May to April. The report said that last year shippers and carriers settled at contract rates at or below the preceding year's level. "However, this year shippers can expect to secure much lower shipping costs given the weak state of the container shipping market," it said.
Drewry expects freight rates will increase in the second half of the year as "cash-burn forces carriers to slash capacity". It is also warning that a repeat of 2010 seems inevitable when freight rates rose and space availability became "highly" limited.
Said Mr Dixon: "Drewry strongly recommends shippers look at the benefits of index-linked contracts to mitigate these dangers."