Drewry’s Global Freight Rate Index, which excludes intra-Asia trades, fell 12 percent in September, representing the fourth consecutive month of falls in the index. Continuing weakness on east-west trades, particularly Asia-Europe, and cascading tonnage onto faster-growing developing market trade routes dragged down the global average. The index of global spot rates has now lost over 35 percent of its value over the past 12 months.
More recent data suggests that the decline in headhaul east-west rates has continued over recent weeks, though the trend has not been uniform. For instance, Drewry’s weekly benchmark rate between Shanghai and the West Mediterranean tumbled over 20 percent in the five weeks to November 2. Meanwhile, Drewry’s Hong Kong-Los Angeles benchmark rate actually increased marginally over the same period, thanks to a 4.3 percent recovery in the final week to US$1,542 per TEU.
Recent capacity withdrawals are having a more stabilising influence on rates on the trans-Pacific, but the Asia-Europe trade remains severely over-tonnaged as a result of an influx of newbuild ultra-large containership capacity with no alternative trade to go to.
“The characteristics of the trans-Pacific and Asia-Europe trades are diverging,” said Container Freight Rate Index editor Martin Dixon. “The removal of capacity from the former is proving sufficient to put a brake on further rate erosion. However, the absence of any such action on the Asia-Europe trade means that rates have further to fall.”
Some trades have proven more resilient than others. In particular, South Asia, South America, Oceania and intra-Asia trade lanes have witnessed some stabilising in freight rates. While Sub-Saharan African trades have managed to buck the overall trend with a strong rebound in pricing. However, in general terms the freight rate environment remains very weak, as characterised by the once mighty trans-Atlantic where rates have fallen by over 25 percent since their mid-year peak.
“Container shipping remains very much a buyer’s market with rich pickings for shippers coming into the annual contracting season,” continued Dixon. “Given faltering global demand, the level of overcapacity and carriers’ continued penchant for chasing market share, Drewry does not expect rates to recover notably in the near term.”
Shipping costs have become increasingly volatile over recent years as illustrated by the gyrations in Drewry’s Global Freight Rate Index. Prior to the recent slump in rates, the index had more than doubled in the period between May 2009’s all-time low and its peak in July 2010. Rate movements on Drewry’s East-West Freight Rate index, a weighted average across key Asia-Europe, trans-Pacific and trans-Atlantic trade routes, have proven even more volatile.
“Drewry expects container freight rates to remain volatile for some time to come,” added Dixon. “A less predictable geopolitical and economic environment will make it increasingly difficult for carriers to accurately match new build capacity to demand, so leading to more turbulence in the shipping cycle.”