Ocean carriers risk increased freight rate volatility on routes from Asia to the east coast of South America as they significantly increase capacity even as demand weakens, according to industry analyst Alphaliner.
Spot rates from China to Brazil have fallen to $1,688 per 20-foot container in April from $2,220 at the beginning of the year, a 24 percent decline driven by weaker volume growth.
Rates face further downward pressure as carriers bring bigger ships into the trade. Evergreen and Cosco plan to upgrade their jointly operated ESA service in May with ships of 8,000 to 8,800 20-foot- equivalent units, replacing 3,400- to 4,200-TEU vessels currently deployed in the trade.
This will increase the carriers’ average weekly capacity in the Asia-east coast South America trades by more than 120 percent. Evergreen is expected to send several of its five 8,827-TEU newbuildings on long-term charter from Costamare onto the route to rival the largest vessels currently deployed by Maersk and Mediterranean Shipping Co.
Average vessel size on the route has risen from 2,745 TEUs in 2005 to 5,400 TEUs now and is expected to reach 6,000 TEUs by the end of the year, according to Alphaliner.
Traffic at the main ports in Brazil, Argentina and Uruguay grew only 2 percent in 2012 following double-digit growth in 2011 and 2010.