Ocean carriers are unlikely to achieve planned freight rate hikes on the Asia-Europe route this week because they have failed to rein in excess capacity, according to Alphaliner.
Attempts to raise rates on the route since March have been “completely unsuccessful” and “most likely the planned rate increases scheduled for July 1 will also fail,” the container market analyst said.
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Spot market rates on the Europe-Far East trades have been below breakeven levels for all carriers since March. “Still, freight rates have continued to fall and the numerous attempts to raise rates over the past 12 months all failed,” the analysis firm said in a market report.
Several lines have already postponed planned increases of $200 to $300 per 20-foot container by a month because of weak utilization rates. Johnson Leung, an equities analyst with Jeffries in Hong Kong, told last week's Journal of Commerce Shanghai Container Shipping Conference that utilization rates have fallen to 70 to 80 percent on Asia-Europe routes in June.
If implementation is successful, the increases on August 1 would only bring rates back up to where they were in March. “Thus, some carriers would presumably still operate at a loss, even at those somewhat higher rate levels,” Alphaliner said.
The withdrawal of two Asia-Europe service strings in June and July only removes 3.5 percent of the total trade capacity, insufficient to drive vessel utilization rates above 95 percent.
Carriers can impose peak season surcharges at short notice but the impact likely will be short lived as demand is expected to peak in August and weaken again as soon as September.
“This will put rates under further pressure, unless supply will be correspondingly withdrawn,” according to Alphaliner.
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