Far East-Europe rates still falling

Far East-Europe spot rates have plummeted by more than 33% since January after new vessel deliveries in the first quarter outpaced vessel deletions/scrapping by a ratio of 3:1 in terms of teu capacity.

By this week, spot rates on the trade lane had fallen to US0 per teu, their lowest level since February 2012.

According to data from analyst Alphaliner, freight rates are now 46% lower than the same period last year, following two failed general rate increases this year.

Maersk has postponed its planned 15 April 0 per teu increase until 1 May, and other carriers have announced rate increases for 15 May, after also abandoning their April increases.

Rate deterioration can be directly linked to the failure of carriers to hold back on capacity increases during this period of weak demand, and is a result of the influx of new vessels, in particular the new vessels of over 10,000teu of which 38 units are due to be delivered in 2013.

In the first quarter, the global cellular containership fleet saw a growth of 352,326teu, while vessel deletions only reached 126,528teu. Meanwhile, Q1 new orders of 227,693teu were 1,580% higher than in the same period last year, and the idle fleet was 4.6% higher at 809,000teu.

According to Alphaliner figures, average vessel utilisation levels on the trade fell to an estimated 77% in March, “which is too low to support any sustainable rate increase”.

Weekly capacity on the Far East-Europe trade this month is 2.3% higher than in April last year, based on Alphaliner estimates, with further capacity increases expected in the next two months from vessel upgrades.

The analyst reports that seven VLCS/ULCS units of 13,000-14,000teu were delivered last month alone, with 12 more units of between 13,000teu and 16,000teu due in the next two months. All will be deployed on Far East-Europe routes, replacing smaller vessels.