Carriers unite to remove excess capacity

27 August 2013

The Peak Season is with us, yet we have seen almost an unprecedented collapse in ocean freight pricing from China. This is due purely to supply and demand issues; namely too much shipping capacity chasing static cargo volumes.

Transtar watch load factors carefully as it is the harbinger of what is to come. We've seen disastrous load factors for some carriers of sub 70% which results in the inevitable price war that we've seen since mid year.

With rates at loss making levels, carriers have finally opted to collude and take action through the removal of vessels. Our advice is that from mid September, each consortia will take turns of 'blanking' a voyage, the intent being to remove 3000 plus TEU per week from the trade to firstly put a floor under rates and secondly to try gain an increase targeted for September 15. Further, the annual program of vessel withdrawal is likely to commence earlier in November this year.

Assuming this occurs and cargo demand lifts in the final lead up to Christmas, it is quite possible, indeed likely, rates will begin to increase.

We will issue a further update as we get closer to the implementation date of increase.

Transtar Management