LONDON: A fall in container freight rates is being driven by oversupply of vessels rather than a drop in demand according to analyst Crucial Perspectives.
In a report issued recently it was noted that container freight rates had “fallen markedly” by 4% last week, and were 5% lower year-on-year as overcapacity plagued the Asia – Europe and transpacific trades.
On the demand front though headhaul volumes of the transpacific and Asia – Europe trades have grown 10% and 7% respectively year-on-year, with global container shipping demand growing by 4.9% year to date.
“The weaker freight rates are mainly driven by industry oversupply rather than a reflection of weak shipping demand. Therefore, unless global container shipping demand growth accelerates or more capacity is being taken out, the liners’ planned rate hikes in mid-November and early December may meet with limited and short-lived success,” the report said.
“This trend is likely to continue into next year.”
The percentage of containerships in the global fleet that are idle has shrunk to 1.9% from 7.9% a year earlier.
Meanwhile newbuilding capacity entering the fleet is set to outstrip demand growth in 2018.
“Based on the existing orders, newbuild vessels are expected to add 1.6m TEU to the global container shipping capacity next year. We forecast the global container shipping net capacity to grow 5.9% year-on-year in 2018, well ahead of our projected demand growth of 4.7%,” Crucial Perspectives said.a