It continues to be very tough times in the container shipping industry.
First, the analysts are Alphaliner recently calculated that there are currently some 200 container ships globally with above 3000 TEU capacity that are currently sitting idle.
Supply Chain Digest Says... |
 |
| As a result, container lines “appear to have abandoned all attempts to improve profitability this year,” Drewry notes. |
 |
What do you say? |
| Click here to send us your comments |
 |
| Click here to see reader feedback |
|
|
The firm says that idled container ship capacity remains at an "alarmingly high" level of 1.48 million TEUs, equivalent to 7.4% of the global fleet, as demand shows no sign of picking up.
More than 55 ships with capacity of more than 7500 TEU have been taken out of service. The "unprecedented" number of ships of more than 3,000 TEUs without work is prompting owners to consider scrapping relatively young vessels, Alphaliner notes.
All this of course as usual is pushing container rates way down, as deliveries of more new megaships keep coming in the face of this overcapacity. The China Containerized Freight Index is now at about 640, down from 1050 or so a year ago, as shown in the graphic below.
The situation is especially dire on Asia to Europe routes. For example, the Shanghai Containerized Freight Index (SCFI) fell last week by $20 to just $271 per TEU, very close to the all-time low recorded just four weeks ago.
Spot rates for containers moving between Asia and the US west coast tumbled $79 to $770 per 40-foot container, and for the US east coast, rates were down $84 to $1,648.
One casualty of that scenario is South Korea's Hyundai Merchant Marine (HMM), a carrier that is perilous close to bankruptcy, as it frantically attempts to get reduced payment terms from ship leasing companies and also restructure much of its heavy debt.
If HMM fails, it would dwarf all previous bankruptcies in this sector in terms of capacity. HMM operates about 400,000 TEU, and no container carrier anywhere near that size has ever gone bankrupt before.
(See More Below)
|
CATEGORY SPONSOR: SOFTEON |
|
|
| |
|
|
Shippers, Importers, Moving Away from Contracts
As a result of these ultra-low spot market rates, shippers and importers are becoming reluctant to enter into fixed contracts with carriers, the web site theloadstar.com reported this week
It cited data from Oslo-based freight rate analysis firm Xeneta which shows that since the second quarter of 2015, the contract premium paid by shippers has been as much as 50% higher than the average spot rates on the trade.
But of course, contract rates are falling too. The analysts at Drewry Shipping say that freight rates for cargo moving under contracts on the major east-west trade routes have already dropped by 20% in the first two months of the year and are on course to see further deep reductions in coming months.
Because many shippers and importers are finalizing negotiations of new eastbound contracts to take effect on May 1, 2016, Drewry expects a further fall in contract rates in the second quarter. Drewry and other analysts say also say that almost none of the financial benefits from much lower bunker fuel costs are going to carriers, and instead are being negotiated away in lower rates achieved by shippers.
As a result, container lines "appear to have abandoned all attempts to improve profitability this year," Drewry notes, adding that the next trend for shippers could be how to identify and work more with carriers able to maintain reliable service levels despite the revenue and profit pressures..
Are you moving away from contract carriage to the spot market for container movement? How long will rates stay in the toilet? Let us know your thoughts at the Feedback section below.
Your Comments/Feedback
|
