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Container freight rates to hit 2016 levels

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HONG KONG : Overcapacity and stalling demand are driving container shipping rates to new lows, according to the latest Market Pulse report from consultant Linerlytica.

Asia to Europe rates are already below 2019 levels and there is a real risk that rates on the trade could slump to 2016 levels unless drastic capacity management levels are introduced said the report.

“Although overall capacity across the four main trades from Asia to Europe and North America are expected to fall by 14-22% in October mainly from blanked sailings, there has been very few actual service withdrawals with just three services permanently suspended to the US West Coast so far,” said the report.

Containership capacity has now reached record levels of growth, standing at an average growth rate of 190,000 Teu per month since April.

“This pace of growth is the fastest rate ever recorded for the container markets and is set to continue for the next two years.”

With vessel demolition rates at under 10,000 Teu per month the rate of growth has now easily surpassed the capacity growth booms of 2006-08 and 2014-15 which saw growth of a mere 120.000 Teu per month on average.

According to the Freightos Baltic Index (FBX) the westbound Asia to Europe spot rates had fallen to $1,517 per Feu by 15 September this year, down from $1,784 per Feu at the beginning of the month.

Spot rates on the Pacific to the US west coast have decreased according to shipbroker Braemar, but flatlined for freight with east coast discharge destinations. West coast freight at the end of August was at “a recent high point” of $2,033 per Feu but had declined to $1,866 per Feu by 15 September according to FBX data.

Since 1 January, however, west coast rates have appreciated by 33%, according to Braemar.

US east coast rates have seen a marked decline to $2,844 per Feu in the first two weeks of this month from a recent high of $3079 per Feu.

On both the Asia to Europe and Pacific trades the headhaul rates are significantly higher than the 2019 average $1,427 per feu and $1,530 per Feu respectively.

“Keeping a lid on Asia-Europe deployed capacity has been a challenge in 2023. We estimate that 34% of the 13m teu of 2023 newbuilding capacity delivered up to 1 September 2023 was deployed on the dedicated Asia-Europe services. Transpacific trades accepted just 15% of the 2023 newbuilding capacity delivered so far,” said Braemar in its weekly report.

Braemar added that 21 ultra large container ships (ULCS) had been delivered this year to date, with 16 of those vessels deployed on the Asia to Europe trades, the remaining five are operating on Asia to Mediterranean and Middle East services.

Another 60 ULCS orders will be delivered over the coming three years with the majority expected to be deployed on the Asia to Europe trades.

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