Freight rates forecast to remain subdued
03 July 2013
The new Financial Year, for us in Australia at least, is marked by the usual notices of a General Rate Increase to commence July 1. These notices are issued so often and are ignored by the issuers, that they’ve come to have nearly zero meaning. And we expect this trend to continue for the immediate term.
The reasons for the weakness in the carrier's position can be summed up as follows:
- Ships ordered 3-4 years ago are continuing to be launched, and as these mega ships, capable of carrying up to 18,000 TEU are deployed, the ships they supplant need employment elsewhere. Erstwhile profitable trades such as Asia/South America are now dogged by overcapacity as 4-5000 TEU ships are replaced with 8,000 TEU ships. Even our trades are seeing vessels of up to 5,600 TEU capacity being deployed.
- Weakness in the Asia/Europe trade, the world’s largest, is also preventing trade growth from soaking up the newbuilds.
- There is also overall weakness in the Australia trade also with weaker consumer and business confidence taking its toll.
- Even with the demise of STX, whilst only a small container player, there is little sign of a tightening of capacity.
Our view therefore, is of continued weakness in container freight rates and we expect freight rates to remain subdued.