Container Shipping: Asia-Europe freight rates drop sharply

commercial cargo ship carrying containers

Rates for shipping containers from ports in Asia to Northern Europe fell by 24.4 percent to $932 per 20-foot container (TEU) in the week to Friday, a London-based container derivative trader with access to data from Shanghai Shipping Exchange told Reuters.

The spot freight rates for transporting containers, carrying anything from flat-screen TVs to sportswear from Asia to Northern Europe, has been on loss making levels several times during 2015.

No relief for shipping companies is seen in 2016.

“Insufficient measures to reduce ship capacity will lead to an acceleration of freight rate reductions and industry-wide losses in 2016,” shipping consultancy Drewry wrote in a research note.

Drewry said the decline in global container shipping freight rates have been as great as 9 percent last year and Drewry is forecasting that carrier unit revenues will decline further in 2016, albeit at a slightly slower pace.

Excluding 2009, the past 12 months has seen the lowest spot rates in most major trade lanes and all at the same time. End of year 2015 spot rates from Asia to the US West Coast and US East Coast were around $815 and $1,520 per 40 foot container respectively – the lowest since 2009.

“The rate deterioration emphasise that carriers have been fighting for market share and are positioning themselves further for the potential shifting of cargo from the West to the East Coast after the Panama Canal widening,” Drewry wrote.

Maersk Line, the world’s biggest container shipper with more than 600 container vessels, in November reported a 61 percent drop in net profit in the third quarter. The Danish shipping company controls around a fifth of containers transported from Asia to Europe.

Handelsbanken Markets expects average freight rates to drop by around 10 percent this year. “We expect therefore that Maersk Line will have a profit in 2015 of $1.4 billion. For 2016 expected earnings to fall to $303 million.

Source: Reuters

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