Ultra Large Container Ships is primary driver of bearish container freight rates Thursday, 02.Jun.2011, 11:41 (GMT+3)
Aggressive pricing by Ultra Large Container Ship (ULCS) operators threatens Asia-Europe rates this year and next.
The introduction of ULCSs is the primary driver of bearish Asia-Europe
container freight rates this year, according to one leading analyst,
who told IFW the market could further deteriorate in 2012 when deliveries peak.
Janet Lewis, Regional Head of Industrials & Shipping Research in
Asia at Macquarie Capital Securities, said that overall demand on the
Asia-Europe trade had been ârobustâ this year but the deployment of
ULCSs of over 10,000teu capacity was having a âdisproportionateâ impact
on the market.
âThereâs pressure from owners to fill them,â
she said. âIf you replace an 8,000teu capacity vessel with one of
12,000teu and you want 90% utilisation, then thereâs the temptation to
discount because your cost per teu is lower.
âWe believe that
operators who have introduced the new vessels have been aggressive in
pricing to attract cargo, putting more pressure on the Asia-Europe
All-in spot rates on services from Shanghai to
northern Europe were down to $892 per teu last week, less than half of
the rate a year earlier, according to the Shanghai Containerised
Freight Index (SCFI).
Last week Maersk announced it would
postpone by a month a US$500/feu General Rate Increase (GRI) originally
scheduled to take effect from today (1 June) because it did believe it
could succeed in the current market.
Lewis predicted liner
performance would improve as the year progressed. âWeâve had a lot of
deliveries in the first half of the year but demand will be higher in
the second half, particularly during the peak season in July to
September, so performance will improve,â she said.
However, the recovery could be brief. According to Macquarieâs latest âAsia Shipping Pulseâ
report, ULCSs with total capacity of 350,000teu are scheduled for
delivery this year, but this will increase to over 750,000teu of vessel
capacity next year, representing more than half of all anticipated
container ship deliveries in 2012.
âThat suggests that rates
on the Asia-Europe route could remain weak in 2012 when deliveries of
ULCSs are likely to peak for the near term,â said the report.