Drewry: Carriers must strengthen prices as rates hit 15-month low
AVERAGE global freight rates fell to a 15-month low in April, according to Drewry's new Global Freight Rate Index which fell 12 per cent in April to reach its lowest level since February 2012, when container shipping was still recovering from the last ocean carrier price war.
The index, which is a weighted average of freight rates across 600 trade routes excluding intra-Asia, reached a new low of US$2,065 per FEU and has fallen 18 per cent since the start of the year.
The index was depressed by a fall in pricing on headhaul trades from Asia to both Europe and North America, where average rates fell 12 per cent apiece across both trades in April. Over half of the 600 trade routes covered by Drewry's Container Freight Rate Insight recorded falling rates in April.
Pricing is now below last year's levels on over one third of trade routes. Pricing has fallen steadily on the Asia-Europe trade since the General Rates Increase (GRI) of mid-March. Last week the World Container Index benchmark from Shanghai to Rotterdam fell below $1,400 per FEU for the first time since February 2012, shedding as much as 13 per cent to $1,335 per FEU.
Meanwhile, eastbound transpacific pricing has retreated since the April 1 GRI, with Drewry's benchmark rate between Hong Kong and Los Angeles falling below $2,000 per FEU for the first time since March 2012 to $1,884 per FEU.
Cascading of surplus tonnage off overburdened east-west trades is sinking rates on once buoyant north-south and regional trades. Until shipping lines take the necessary action to correct capacity, freight rates will remain under pressure.
Drewry believes that carriers will need to remove at least two service strings from the Asia-Europe trade for rates to recover.
Other trades contributing to the fall in Drewry's Global Freight Rate Index were the westbound transpacific and imports into South America, Africa and Oceania. There were precious few risers other than Middle East imports, South Asian exports and northbound African rates.
The intra-Asia trade is not included in Drewry's Global Freight Rate Index but pricing here recovered in April following four consecutive months of declines. In March the index reached its lowest level since Drewry first started publishing the index over two year ago, indicating the underlying weakness in the market despite buoyant demand.
Shipping lines are now carrying high levels of debt after too many lean years. With rates on many trades well below carrier breakeven levels, near term capacity correction is inevitable. Cargo owners should prepare for higher rates and tighter capacity conditions, Drewry said.
AVERAGE global freight rates fell to a 15-month low in April, according to Drewry's new Global Freight Rate Index which fell 12 per cent in April to reach its lowest level since February 2012, when container shipping was still recovering from the last ocean carrier price war.
The index, which is a weighted average of freight rates across 600 trade routes excluding intra-Asia, reached a new low of US$2,065 per FEU and has fallen 18 per cent since the start of the year.
The index was depressed by a fall in pricing on headhaul trades from Asia to both Europe and North America, where average rates fell 12 per cent apiece across both trades in April. Over half of the 600 trade routes covered by Drewry's Container Freight Rate Insight recorded falling rates in April.
Pricing is now below last year's levels on over one third of trade routes. Pricing has fallen steadily on the Asia-Europe trade since the General Rates Increase (GRI) of mid-March. Last week the World Container Index benchmark from Shanghai to Rotterdam fell below $1,400 per FEU for the first time since February 2012, shedding as much as 13 per cent to $1,335 per FEU.
Meanwhile, eastbound transpacific pricing has retreated since the April 1 GRI, with Drewry's benchmark rate between Hong Kong and Los Angeles falling below $2,000 per FEU for the first time since March 2012 to $1,884 per FEU.
Cascading of surplus tonnage off overburdened east-west trades is sinking rates on once buoyant north-south and regional trades. Until shipping lines take the necessary action to correct capacity, freight rates will remain under pressure.
Drewry believes that carriers will need to remove at least two service strings from the Asia-Europe trade for rates to recover.
Other trades contributing to the fall in Drewry's Global Freight Rate Index were the westbound transpacific and imports into South America, Africa and Oceania. There were precious few risers other than Middle East imports, South Asian exports and northbound African rates.
The intra-Asia trade is not included in Drewry's Global Freight Rate Index but pricing here recovered in April following four consecutive months of declines. In March the index reached its lowest level since Drewry first started publishing the index over two year ago, indicating the underlying weakness in the market despite buoyant demand.
Shipping lines are now carrying high levels of debt after too many lean years. With rates on many trades well below carrier breakeven levels, near term capacity correction is inevitable. Cargo owners should prepare for higher rates and tighter capacity conditions, Drewry said.