Global container freight rates fell for the fourth straight month in September and are down 35 percent in the last 12 months, according to London-based Drewry Maritime Research.
Drewry’s Global Freight Rate Index, which excludes intra-Asia services, fell 12 percent amid continuing weakness on east-west lanes, particularly Asia-Europe, and the cascading of tonnage onto faster-growing markets in developing countries.
The weekly benchmark rate between Shanghai and the western Mediterranean tumbled more than 20 percent in the five weeks to Nov. 2. Drewry’s Hong Kong-Los Angeles benchmark rate increased marginally over the same period, thanks to a 4.3 percent recovery in the final week to $1,542 per 40-foot-equivalent unit.
The gap also is showing in the Shanghai Containerized Freight Index. The Shanghai Shipping Exchange's measure last week showed spot rates to Europe plummeting 5.5 percent on Asia-Europe business to a year-low of $613 while Asia-Mediterranean rates were off 5.8 percent to $863. U.S. West Coast rates, by contrast, were up 0.4 percent.
Recent capacity withdrawals are helping stabilize trans-Pacific rates, but Asia-Europe trade lanes have excess capacity from the delivery of large container ships that can’t operate in any other trade lane.
“The characteristics of the trans-Pacific and Asia-Europe trades are diverging,” said Martin Dixon, editor of Drewry’s Container Freight Rate Insight. “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.”
Drewry said rates have stabilized in the South Asia, South America, Oceania and intra-Asia trade lanes, and that sub-Saharan African trades have buck the overall trend with a strong rebound in pricing. But trans-Atlantic rates are down more than 25 percent from their mid-year peak.
“Container shipping remains very much a buyer’s market with rich pickings for shippers coming into the annual contracting season,” Dixon said. “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. Before the recent slump in rates, Drewry’s Global Freight Rate index more than doubled between May 2009’s all-time low and its peak in July 2010. Rates 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,” Dixon said. “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.”