Asia to Europe Shipping Lines Under Water on Rates

According to Lloyds List, the marine industry news publication, container freight rates between Asia and Europe have fallen back to levels not seen since earlier this year and shipping lines are bleeding to death. Lines lifted rates in April in an attempt to achieve a level of solvency but they failed to hold and have since sunk back to about $350/teu (twenty foot equivalent unit ” a standard end opening 20ft container), just $50 above the rick bottom lows earlier this year. At a time when most lines combine the container rate and the bunker fuel charge this is especially difficult as fuel charges have risen. Unless lines manage to lift rates in the next few weeks ahead of what is usually the busiest time of the year for cargo moving from Asia to Europe they face many months of extremely depressed conditions that some will not be able to survive industry insiders are quoted as saying.

Shipping lines are looking to raise rates for the busy summer season. All the lines have posted intended rate increases of $300-400 per teu and CGM, an industry leader, is moving onto invoicing bunker charges separately. But whether the rate rises will stick remains to be seen. In an interview with MetalMiner, Damco a major UK freight forwarder and part of the A.P. Moeller-Maersk Group, admitted inbound volumes were down 30% and they had heard about 500 vessels are laid up because of the downturn.

The lack of container traffic is not just evident on the Asia-Europe route. Logistics Management in their June publication quoted industry sources as saying Asia-USA cargoes are down nearly 23% to under 1.5 million teu’s.

If lines cannot lift rates over the coming months they will probably not be able to raise them until after the 2010 Chinese New Year, by which time some carriers may be well and truly under water, metaphorically if not literally!

–Stuart Burns

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