Executive Briefings

Rates in Container Shipping Industry Expected to Continue to Fall

Shipping consultants Drewry have released their container shipping review for the first quarter 2016, and the outlook does not look positive.

"Global rate levels are no longer sustainable and ... the lines' General Rate Increase mechanism [will] soon to be defunct on European trades due to new EU regulations," according to Drewry, which expects rates to fall further. As fuel costs are already at bottom, the carriers are unlikely to be able to reduce their overhead further, and losses are likely to accelerate.

The outcome is likely to involve "radical capacity management" at the trade route level, the firm says. It is not bullish on the new generation of ultra large container vessels, suggesting that the savings per TEU per voyage have dropped with fuel prices, as fuel consumption now makes up a smaller fraction of overall operating costs – and that port costs rise as facilities struggle to accommodate the outsize ships and their sudden surges of cargo.

“We know that for each individual company the desire for big ships is logical, but the impact on the industry at large has been disastrous,” said Drewry, contributing to plummeting freight rates.

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"Global rate levels are no longer sustainable and ... the lines' General Rate Increase mechanism [will] soon to be defunct on European trades due to new EU regulations," according to Drewry, which expects rates to fall further. As fuel costs are already at bottom, the carriers are unlikely to be able to reduce their overhead further, and losses are likely to accelerate.

The outcome is likely to involve "radical capacity management" at the trade route level, the firm says. It is not bullish on the new generation of ultra large container vessels, suggesting that the savings per TEU per voyage have dropped with fuel prices, as fuel consumption now makes up a smaller fraction of overall operating costs – and that port costs rise as facilities struggle to accommodate the outsize ships and their sudden surges of cargo.

“We know that for each individual company the desire for big ships is logical, but the impact on the industry at large has been disastrous,” said Drewry, contributing to plummeting freight rates.

Read Full Article