Far East-South America rates hit rock bottom – Alphaliner

Containership

Freight rates in the Far East to East Coast South America (FE – ECSA) trade have fallen by 90% over the past twelve months, eroded by weak demand and low capacity utilisation.

The poor market environment has forced carriers to slash rates from over $1,000 per teu, recorded in January 2015, to today’s record low of only $113 per teu from Shanghai to Santos, according to the latest SCFI assessment from 5 February.

The lowest rates in the market have reportedly dropped below $50 per teu, as capacity utilisation averaged only 70% in January with no pre-holiday rush before the Lunar New Year. These rock bottom rates are forcing Maersk Line, MSC and MOL to rationalise their Far East – ECSA offering by merging two loops into a single service, effective mid-February. This rationalisation move follows last year’s decision by PIL, K Line, HMM and Yang Ming to shut down their joint SSA/AESAL/NHX/SA1 loop in October. Combined, the closure of these two services sees FE – ECSA weekly capacity cut by about 23%, compared to September 2015.

Following the latest rationalisation exercise, only four weekly strings will be retained on the FE – ECSA route. These provide an overall weekly capacity of only 35,000 teu – the lowest offering recorded on this trade since 2009. Despite the rather massive capacity reduction, continued weak demand on the sector will make carriers’ efforts to raise freight rates to a more sustainable level rather challenging. The average size of vessels deployed on the four remaining FE – ECSA services will soon reach 8,800 teu, a remarkable jump of over 100% since 2009.

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Source: Alphaliner

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