The Outlook For Global Container Shipping
Below is a summary of Business Monitor International (BMI)’s current views on the global shipping sector:
- Transpacific shipping rates are still doing relatively better than Asia-Europe rates, but are down in year-on-year (y-o-y) terms.
- Asia-Europe freight rates are down on lack of demand (due to continued economic woes in the eurozone) and over-supply of vessels (there are more vessels and vessels of a larger size that can only operate on the Asia-Europe trade route).
- A rate war has erupted in the Asia-Europe rote, which has forced rates down below the US$1,000 per TEU (twenty-foot equivalent unit) level, as operators fight for market share.
- Ships are now sailing at a loss – a container can be shipped between Shanghai and Rotterdam for just US$740.
- All this is very bad for shipping lines, and could see them post losses this year if the rate war continues. Trust has been lost, so the rate war could continue for a while yet.
- Low freight rates are good for shippers; auto parts manufacturers, retailers, food and drink suppliers, ICT producers, and also potentially pharmaceutical makers, could benefit from these really low freight rates, which have slashed their transportation costs.
- When will overcapacity end? 2015 is being floated as the year that supply and demand will reach equilibrium, but that was prior to the launch of the mentality of ‘my ship is bigger than your ship’, which will see even bigger vessels placed into service in the medium term.
Full coverage of the global freight transportation sector is available to subscribers at Business Monitor Online.