The container shipping orderbook currently stands at 6.6 million TEU, equal to 26.7% of the global container shipping fleet. Much of the capacity is scheduled for delivery in the next two years. However, a significant drop in ocean freight rates is unlikely to materialize as carriers have said they will implement capacity management to match any slowdown in volume.

“The alliances have demonstrated the industry is capable of managing fluctuations in demand by blanking sailings and idling vessels, and the capacity discipline will react to any oversupply situation,” said Xavier Destriau, CFO of Zim Integrated Shipping Services. Hapag-Lloyd spokesperson, Tim Seifert said that “adjusting capacity to demand is an integral part of our day-to-day business.”

According to Alan Murphy, CEO and founder of Sea-Intelligence Maritime Analysis, carriers will skip sailings and forgo weekly schedule integrity to keep utilization and rates elevated. “The second quarter of 2020 saw the sharpest drop in container volumes in the history of liner shipping, but rates held firm through the volume crash as carriers blanked up to 50 percent of sailings in some weeks,” said Murphy. He added that the Trans-Pacific and Asia–Europe markets “will never see $500 freight rates again.”

Sustained demand on major East-West trade lanes, port congestion and equipment shortages have contributed to keeping rate levels elevated. According to rate benchmarking platform Xeneta, spot rates from Asia-U.S. West Coast have doubled y/y, Trans-Atlantic rates from North Europe to North America are up 145% y/y and Asia to North Europe spot rates are 30% above the same time last year despite a -30% decline since January 1. Although carrier executives forecast spot rates to fall through the second half of 2022, several have already locked in long-term contracts at high rate levels.

Sustained demand on major East-West trade lanes, port congestion and equipment shortages have contributed to keeping rate levels elevated. According to rate benchmarking platform Xeneta, spot rates from Asia-U.S. West Coast have doubled y/y, Trans-Atlantic rates from North Europe to North America are up 145% y/y and Asia to North Europe spot rates are 30% above the same time last year despite a -30% decline since January 1. Although carrier executives forecast spot rates to fall through the second half of 2022, several have already locked in long-term contracts at high rate levels.

 

 

Source: Journal of Commerce