Ocean carriers are delaying planned freight rate increases from the Far East to Europe after spot rates plunged to a 14-month low amid a widening supply-demand gap driven by increasing numbers of new extra large container ships entering the world’s biggest liner trade.
Spot rates to ship a 20-foot container to Europe have fallen to $940, the lowest level since February 2012, extending a downward spiral that began last July.
Freight rates are now 46 percent lower than a year ago after two failed attempts to increase general rates in 2013, according to industry analyst Alphaliner.
Spot rates have fallen more than 33 percent since January as a result of the influx of new ships, particularly vessels of more than 10,000 20-foot-equivalent units.
Weak market sentiment has forced market leader Maersk to postpone today’s planned rate hike of $500 per TEU by two weeks to May 1, while several rival carriers have announced a further round of rate increases for May 15 after passing up hikes scheduled for April.
“Carriers’ failure to rein back capacity increases on the trade to match the weak demand conditions has been the main reason for the rate deterioration,” Alphaliner said.
Average vessel utilization levels fell to an estimated 77 percent in March, which is too low to support any sustainable rate increase, according to Alphaliner.
Weekly capacity on the westbound Far East-Europe route is 2.3 percent higher in April than a year ago and is set to increase in the coming two months as carriers introduce larger ships.
Seven vessels of 13,000 to 14,000 TEUs were delivered in March alone with 12 more of 13,000- to 16,000-TEU capacity due in April and May, all of which will replace smaller ships in the Far East-Europe trade.
A total of 38 ships of more than 10,000 TEUs are due for delivery in 2013, Alphaliner said.