Far East-South America Rates Reach Bottom
Freight rates in the trades between the Far East and East Coast South America have fallen by 90 percent over the past twelve months, Alphaliner, an ocean shipping information company, has reported.
The prices have eroded, said Alphaliner, because of weak demand and low capacity utilization.
The poor market environment has forced carriers to cut rates from over $1,000 per TEU in January 2015, to a record low of $113 per TEU from Shanghai to Santos. The lowest rates in the market have reportedly dropped below $50 per TEU. Capacity utilization averaged only 70 percent in January 2016 and there was no pre-holiday rush before the Lunar New Year, according to Alphaliner.
“These rock bottom rates are forcing Maersk Line, MSC and MOL to rationalize their Far East – ECSA offering by merging two loops into a single service,” said the Alphaliner report. “This rationalization move follows last year’s decision by PIL, K Line, HMM, and Yang Ming to shut down their joint SA/AESAL/NHX/SA1 loop in October. Combined, the closure of these two services sees FE – ECSA weekly
capacity cut by about 23 percent, compared to September 2015.” The Maersk-MSC-MOL rationalization became effective in mid-February.
Following the latest rationalization, four weekly services will remain on the Far East to East Coast South America route. These provide an overall weekly capacity of only 35,000 TEU, according to Alphaliner, the lowest recorded on the route since 2009. “Despite the rather massive capacity reduction,” Alphalner concluded, “continued weak demand on the sector will make carriers’ efforts to raise freight rates to a more sustainable level rather challenging.”
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