Slow demand to sink shipping rate rises?

Worldwide – Global container shippers may find it difficult to raise freight rates this month because of oversupply problems caused by slow seasonal demand this quarter, several brokerage houses have stated. Nevertheless, this year’s sixth consecutive price increase has already been announced by major players.

Taiwan’s Evergreen Marine says it will hike rates for routes from the Far East and Indian subcontinent to Europe and the Mediterranean region by US$ 450 per 20-foot equivalent unit (TEU) and by US$ 900 per 40-foot equivalent unit (FEU). Meanwhile, Wan Hai has confirmed a price increase proposal on all dry cargoes originating from Asia of US$ 300 per TEU and US$ 600 per FEU for routes to the Middle East and Pakistan. Rates on routes to India and Sri Lanka have been increased by US$ 200 per TEU and US$ 400 per FEU.

‘With expected oversupply in the shipping sector near term, it will be challenging to fully pass on the higher fuel costs unless the industry cuts more capacity,’ JPMorgan analyst Corrine Png has reported. Major container shippers in Taiwan may see profitability in the October-to-December period decline from three months ago – the traditional high season for the industry, according to Capital Securities Corp.

SinoPac Securities Investment Service is more optimistic. Despite a low level of idling vessels, it says major global container shippers have been indirectly controlling capacity by reducing speeds and not operating extra services during the peak period. The economic recovery in the USA and Europe may also boost the rate restoration programme.

Moreover, Evergreen Marine, Wan Hai and Yang Ming Marine Transport Corp. are likely to ‘return to the black’ in the third quarter, argues SinoPac Securities.

Source: Taipei Times