Container Shipping Hits Bottom -Drewry
But the recovery will be long and hard for shipping lines battered by record-low rates, the industry consultants say.
The rate charged to transport a 40-foot container from Asia to the U.S. West Coast has fallen to an all-time low of $800, less than a third of the price in 2010, according to Drewry, the U.K.-based shipping consultants.
That’s as low as rates are likely to go, Drewry says. Demand remains tepid, and too many ships are available to carry cargo. But rates have fallen so far that shipping lines can’t cover their costs. They’ll either cut capacity, or the weaker carriers will go out of business, gradually bringing the market back into balance, said Drewry analyst Neil Dekker.
“The shipping lines were all driving rates down on pretty much all trade routes to either get more or hang on to market share. Logic dictates there’s only so long you can do that because at the end of the day, you’ll go bust,” Mr. Dekker said. “They’ve seen that the market share war, which has led to incredible rate destruction – they can’t keep doing that.”
Some shipping alliances – which band together to share space on large, chartered container ships – have already begun to cut capacity on certain trade routes, including services that bring goods from Asia to Northern Europe and from Asia to the east coast of South America. The result has been modest gains in the rates they are able to charge shippers.
But Drewry said shipping lines face a long rebound. For 2017, the firm predicts that global freight rates will rise by about 8%, a small gain compared with the declines of 2015 and 2016. Demand growth is expected to grow by less than 2% this year, Mr. Dekker said.
Other parts of the freight transportation industry are stabilizing after steep price declines as well. The Internet Truckstop, which measures loads and prices for business between freight brokers and trucking companies, said rates rose an average of 0.5% a week over the four weeks ending June 25, though prices were still 11.7% behind the same period a year ago. DAT Solutions, another so-called load board, said rates in its weekly index held steady through most of June.
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