Shippers won't be able to steer clear of volatility
While Maersk is raising rates on Asia-Europe route, fluctuations are expected as sailing cancellations rise and a surge in new capacity looms
Shipping freight rates are set to stay volatile next year despite increasing cuts in the number of sailings as new supply of capacity is set to flood the market over the next two years, say analysts.
Cancellations of sailings have been on the rise in the past two months and are set to continue well into the winter as shipping lines try to suppress supply to push up freight rates, which have stayed dismally low after a brief peak in August, according to shipping research agency Drewry.
But with carriers unwilling to postpone delivery of new ship orders, which will provide the market with 1.9 million of additional 20-foot equivalent units (teu) in the next 15 months, any increase in freight rates is likely to be minimal and short-lived.
While Danish shipping line Maersk announced a US$950 rate increase on its Asia-Europe route effective next month, Tan Hua-joo, executive consultant of shipping research firm Alphaline, said in a maritime conference in Shenzhen yesterday that the hike may last just a few weeks.
"While there is a 2 per cent overall reduction in capacity on the Asia-Europe routes, the average size of vessels has been increasing over the past three years, bringing down carriers' cost by US$100 to US$200 per teu."
Shipping companies said freight rates had fallen to an "unsustainable level" at below US$700 per teu in the middle of the year.
