Spot freight rates on the trans-Pacific and Asia-Europe trade lanes may not recover from their three-month slide until the peak season demand in the third quarter of this year, according to BIMCO, the independent shipping association in Copenhagen.
BIMCO said in a bulletin issued Thursday that carriers should consider idling some vessels to restore freight rates significantly over the coming quarter, as fears of overcapacity continue to undermine their efforts to increase rates.
But it said idling is unlikely to happen. "That could jeopardize peak-season earnings even if solid consumer confidence is restored and the high unemployment figures start to come down," the bulletin said.
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"Low volumes have triggered fierce competition on main trading lanes including Shanghai-Europe," said Peter Sand, a shipping analyst at BIMCO. "Rate cuts are ongoing as liner companies struggle to fill their vessels."
Container rates have been sliding on all the major trading lanes since July 2010, "with the exception of a small hiccup around the turn of the year, as liner companies tried to push for implementation of general rates increases in a weakening market, BIMCO said.
"The anticipated strong volume rebound following the Chinese Lunar New Year did not materialize, and that resulted in continued descending rates on most trading lanes," it said.
BIMCO attributed the decline in rates to oversupply in the main routes, which it called "poison to any freight market ... even though volumes are growing fast but not enough."
Overcapacity is expected to continue through the year. Ten vessels of more than 10,000 20-foot equivalent units have been delivered into the Asia-Europe trade so far this year. Taking delays into account, BIMCO foresees another 34 ships with capacities of more than 10,000 TEUS could be launched during 2011.