The drive to build more operationally efficient vessels will lead to a cascading of oversize vessels is still nascent trades, Drewry Shipping Consultants Head of Container Research Neil Dekker said Wednesday.
Speaking at the Journal of Commerce
-organized TPM Asia conference in Shenzhen, Dekker said large vessels displaced on the Asia-Europe trade have already begun to flood into north-south trades that have seen high growth rates the past few years.
The problem, Dekker said, is that intense market pressure is already dampening returns on these growing trades before they’ve matured enough to handle all the capacity coming their way.
As an example, he said spot rates from Asia to Brazil have fallen off a cliff — rates have gone from $2,000 per TEU in January to $500-to-$600 per TEU in early October.
“That’s not sustainable — even shippers would agree,” Dekker said. “Something has to happen on this trade route in the next quarter, or else rates will go even lower.”
Drewry estimated that carriers lost on the order of $150 million in the first half of 2013 in trade.
“On the emerging routes, we’re positive, but don’t think we’ll see double-digit growth continue — maybe 5 to 8 percent," he said. “By putting big ships into this trade route, it isn’t an immediate passport to becoming profitable. What you’re gaining in better costs, you’re having a bad influence on the freight-rate side of the equation.”