The first five months of 2012 have been developing in the right direction for the container shipping industry. Freight rates on the main routes have been going up markedly and consecutively in March, April, May and June, despite happening at a decreasing amount (the total hikes amount to US$1100 - 1300 per TEU. This has lifted freight rates on the Far East to Europe trading lane from US$536 per TEU just before Christmas to the current level of US$1634 per TEU, equal to +205%.
Putting the current freight rate level into perspective, we are now back at where the industry was some 21 months ago in September 2010, after spending large parts of the meantime at unsustainable freight rates levels.
Container volumes on the Far East to Europe trading lane grew by 5% in the first quarter, which is just below the BIMCO expectation of 6% for the overall demand growth for the container shipping sector. Meanwhile, on the US West Coast, volume growth has been slow in the first quarter, at just 0.4% as compared to the same period last year.
When rates go up, the idle fleet tends to come down, as shipping companies seek to strike the perfect balance between holding up rates and adding just as much capacity as they need in the market place. Since the middle of March, the idle fleet has dropped by 47% from just above 900 000 TEU to around 480 000 TEU today. As long as rates hold up well and slide only marginally, the idle fleet should continue to drop, as owners make services ready ahead of the peak season in August.
During the first five months of 2012, 88 new containerships of 654 000 TEU have joined the active fleet, while 60 ships have left for demolition. This made the active fleet grow by 3.6% so far in 2012. The largest vessels to enter the fleet were the China Shipping Group twins CSCL Neptune and CSCL Uranus, both ships that were built in South Korea are able to carry 14 074 TEU and were ordered back in 2007 at US$169 million apiece
The overall containership supply is developing as projected. BIMCO has upwardly adjusted the demolition quantum for the full year following the rush to the breakers in the first five months of the year; a rush that could tail off slightly, as demolition prices have decreased recently.
The third quarter peak season will soon be upon us, and carriers are expected to upgrade their services during June to cater for customers and the increasing volume that is expected during July, August and September. However, BIMCO expects that the focus will be on preserving freight rates and limiting the expected weekly decreases in these rates in the coming weeks. BIMCO expects the short-term focus to be on balancing the demand for new tonnage with deployed capacity.
Depending on the individual carriers’ expectations for when demand is going to peak in coming months, they are likely to position themselves accordingly by adding extra tonnage to the services. Should the demand peak turn up earlier than expected, rates will go up; and vice versa if the peak season appears to be ‘back-end loaded’. Let’s hope we are heading for a great Christmas, even though the growth perspective in the US and EU do not look that great at the moment.
Written by Peter Sand, BIMCO
This is the third of a four-part summary of the BIMCO Shipping Market Overview & Outlook 2012-13. The full report can be accessed here
Read the article online at: https://www.worldcement.com/europe-cis/06082012/bimco_report_container_shipping_1186/