Container freight rates plunging to new low
by CKB - 27/10/2011
"2011 has been a tumultuous year for shipping. Container freight rates plunging to new low."
By any measure 2011 has been a tumultuous year for shipping.
In the meantime, most shipping sectors are struggling and Europe’s quandary is not helping. Average container ship freight rates worldwide have plunged 70% since a 2010 peak. Fleet container-carrying capacity, already oversupplied, is set to rise by 30% over the 2011-2013 period as the newbuilding orderbook is delivered. At the same time growth in the demand for container ship space over this three-year stretch is not expected to exceed 18%. Fleet supply and demand are not due to be back in balance for at least five years.
Evidence of the extent to which shippers are benefiting from ship owner misfortunes is given by the fact that it now costs only USD 650 to ship a 20-foot container from Asia to Europe in contrast to USD 2,100 some 18 months ago.
The trickle-down effect will ensure that the owners of the smallest ships, i.e. those vessels of 1,000-2,000 TEU engaged in the coastal distribution trades, bear the brunt of this depressed container ship market. A large percentage of the current orderbook is comprised of ultra-large container ships of 10,000 TEU and above. On delivery these vessels will go into service on the major deepsea trade lanes, displacing mid-size ships in the process. The mid-size vessels, in turn, will move into the regional trades, providing stiff competition for the existing small ships on these routes.
In the face of continued fleet overcapacity and depressed freight rates, container ship owners are weighing up a range of contingency measures, including scrapping older tonnage. A significant amount of consolidation, especially in the small ship sector, seems unavoidable.