Big Ship Orders Depressing Rates, Drewry Says

Big Ship Orders Depressing Rates, Drewry Says

New orders for ultra-large container ships are undermining carrier efforts to limit the surplus of capacity that is depressing freight rates this year.

“While these latest new orders won’t actually hit the water for years, their psychological impact is to keep the focus on capacity and the big question of how on earth carriers will be able to absorb it all,” Drewry said in its monthly Sea & Air Shipper Insight report.

Drewry said this week’s announcement by China Shipping Container Lines that it is ordering five new ships with capacities of 18,000 20-foot-equivalent units is further proof of the demand for these fuel-efficient ULCVs among the major lines, and that it is just a question of time before other carriers start ordering ships of this size.

“Ocean carriers did a decent job over the winter months balancing supply to ensure that freight rates remained relatively firm, but the delivery of big new ships — leading to new services and upgrades of existing loops — will mean lines will find that task increasingly difficult for the remainder of 2013,” said Simon Heaney, research manager at Drewry.

“These new orders and speculation of more to come could be having a negative impact on rates right now. Carriers cannot shift the paradigm from the supply pressure they are facing so that they can get rates moving upward again,” he said.

Average spot freight rates on 11 east-west ocean trade lanes have fallen 13.3 percent from the first week in January, or $736 per 40-foot-equivalent unit, as measured by the composite Drewry-Cleartade World Container Index.