Container freight rates rise in the run up to new IMO 2020 low sulphur fuel rule
CONTAINER spot freight rates on mainline Asia-Europe and trans-Pacific services surged by 12-30 per cent at the end of October after shipping lines introduced general rate increases (GRIs) on November 1
13 November 2019 - 19:00
Shippers should brace themselves for more hikes in the coming weeks, warned London-based maritime research consultancy Drewry.
The Freightos Baltic China/East Asia to North America west coast 40-foot container index was up 9.5 per cent week on week to reach US$1,529 per (FEU) on November 10, reported American Shipper.
And, while freight rates from China/East Asia to the North America east coast made only a marginal gain over the week, the Freightos Baltic China/East Asia to North Europe 40-foot container index rose by 4.71 per cent week on week to $1,467 per FEU on November 10.
Likewise, Drewry's World Container Index - a composite of eight major east-west trades - has risen $210 in the last two weeks, helping carriers recoup losses endured over the previous two months.
Drewry predicts that freight rates will rise further, arguing that capacity reductions by carriers and higher bunker surcharges as IMO 2020 low sulphur fuels are phased in will continue to drive rate inflation on the key Asia-Europe and trans-Pacific trades.
'Volumes were moribund in the third quarter peak season and judging by the continued heavy use of void sailings by carriers, that situation hasn't changed dramatically,' Drewry was cited as saying. 'Instead, it is changes on the supply side that are driving the upward momentum.'
The idle global containership fleet swelled to one million TEU, equivalent to 4.5 per cent of the total cellular fleet, as of the first week of November.
'That represents an extra 400,000 TEU added to the inactive fleet in one month, which can be attributed to more ships being sent to dry-dock for exhaust scrubbers in readiness for the new IMO 2020 low sulphur fuel regulations,' said Drewry.
The maritime consultancy believes that demand is now strong enough to ensure that capacity cuts translate into 'more positive utilisation and freight rates.'
Adding to the inflationary momentum is the fact that ocean liners are beginning to transition to higher new bunker surcharges related to IMO 2020.
'This process is expected to ramp up for December and should contribute to a strong end to the year for carriers,' noted Drewry.
'While carriers will welcome the upturn in prices, they will also be mindful that it is slightly illusionary as it required a substantial - and temporary - removal of tonnage and a costly new fuel regulation to achieve,' concluded Drewry.
'Freight rates will continue to rise on account of higher bunker surcharges, but for carriers the true measure of success will be whether or not they rise sufficiently to cover the additional costs.'
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