Analysts don’t expect Asia-Europe rates to recover in the coming weeks because there is no surge of volume and reduction of overcapacity in sight.
Rates between Shanghai and North Europe fell $10 per 20-foot equivalent unit last week to $490 per TEU, according to the Shanghai Containerized Freight Index. Spot rates on the route are nearly 65 percent lower than they were at the start of 2011.
“I do not see a hope for Asia-Europe at this point of time. I don’t see spot rates rising back to $750 per 20-foot equivalent unit, but that wouldn’t really be a recovery,” said Rahul Kapoor, a Singapore-based shipping analyst with investment bank RS Platou Markets.
He said Chinese exports to the EU have fallen at a much faster month-to-month pace than they have to the U.S. Exports from Chinato the EU in November rose just 5 percent year-over-year, less than a quarter of the growth rate seen in July and August, according to China’s General Administration of Customs.
Asian imports of European goods in November were up 3.5 percent year-over-year but 0.14 percent lower than in September, according to Container Trade Statistics. September volume on the route was 0.52 percent lower than a year earlier. Indian ministers said the EU’s sovereign debt crisis slowed export growth in November to 4.2 percent from 30 percent a year earlier.
Although carriers have started to suspend some Asia-Europe services for the slack winter season, they have laid up 526,000 TEUs of capacity, or 3.4 percent of the total container fleet capacity, according to BIMCO’s December Market Review. That’s just a little more than a third of the 1.5 million TEUs that was idle at the end of 2009 when carriers took stronger measures to stem the slide in rates.
Kappoer said vessel utilization on the trade lane has fallen below 80 percent from the 85 percent to 90 percent utilization seen in the first half of the year.
“Carriers, in my opinion, were too short-sighted and saw this as a temporary blip or soft patch in demand, but, ultimately, [they] are left saddled with too much overcapacity as container shipping seasonality did not materialize and market share retention strategies kept them from pulling out capacity,” he said.
Reports from Alphaliner, a container shipping consultant, suggest that the Daily Maersk service isn’t attracting the utilization that Maersk Line hoped for, said Janet Lewis, Macquarie Capital Securities’ regional head of industrials and shipping research.
“It is clear that the industry is going through another painful period, yet on the Asia-Europe route in particular, there appears to be a preference for death by a thousand cuts rather than cutting off the problem limb and exiting the trade route,” she said.
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