Freight rate hikes seem unlikely in January due to high inventory levels, modest capacity cuts

CONTAINER shipping lines may find it difficult to implement higher freight rates planned for January on the back of high inventory levels and modest capacity cuts, according to Alphaliner.

It believes that the factors that enabled carriers to sharply boost rates at the beginning of 2010 are "noticeably absent" for the next round of increases, reports The Journal of Commerce Online.

Back in January 2010, the carriers were able to secure rate hikes because deep capacity cuts on Asia-Europe and transpacific routes coincided with a surge in cargo demand driven partly by inventory re-stocking in the US and Europe. At the same time there was a shortage of containers.

However, "These factors are missing in today's market as carriers prepare to lift rates by US$500-$600 per 40-foot container on Europe-Asia routes and set a $400 per 40-foot guideline increase for the 2011/12 transpacific contract season," the report said.

"Carriers have made only modest capacity reductions during the current winter period, and some even continue to add new capacity despite only moderate utilisation levels," Alphaliner was quoted as saying.

It claims that at present weekly capacity on the Far East-Europe and Far East-North America routes is 19 per cent higher than 12 months ago.

The idled box fleet currently stands at 147 containerships with a combined capacity of 356,000 TEU compared with a peak of 1.5 million TEU a year earlier.
(Source:www.schednet.com)