GENEVA — Downward pressure on freight rates for containerized cargo in major shipping lanes is forecast to continue in 2015, despite a pickup in world trade, due in large part to the continued trend of oversupply of new vessels and the drop in bunker fuel prices, United Nations experts said.
This spells good news for shippers handling exports and imports of goods such as textiles and apparel along key sea lanes such as the China-U.S. and China-Europe routes, but it signals more tough times ahead for carriers who have to look at more cost-cutting options.
“Definitely, freight rates for containerized trade will continue a downward trend despite the increase in demand because of more container ship capacity,” said Jan Hoffmann, chief for trade facilitation at the U.N. Conference on Trade and Development and lead author of the agency’s “Review of Maritime Transport 2014.”
The container freight rate market “is expected to remain under pressure because of the persistent mismatch between supply capacity and demand. The gap may actually grow in the coming years due to the increased order of container ships,” the report said.
The container-ship order book following placement of new orders for large vessels by carriers — in a race to enhance efficiency and slash operating costs — last year grew 43 million tons, which represents about 20 percent of the fleet in service, it said.
The U.N. study shows that in 2013, the average cost of shipping a 40-foot equivalent unit, or FEU, from Shanghai to the West Coast of the U.S. declined 11 percent to $2,033 from a year earlier.
Frida Youssef, chief of UNCTAD’s transport section, said, “In the first two quarters of 2014, container freight rates remained highly volatile,” and noted in general, rates on the transpacific freight market performed better than those on the Far East-Europe route.
In June, the container freight rates for an FEU from Shanghai to the West Coast of the U.S. averaged $1,763, according to estimates by Clarkson Research Services, the U.N. official said.
Hoffmann, a transport economist, was asked how the sharp drop in world crude oil prices may impact freight rates. He noted that it could influence some shipping companies to abandon the measure of slow steaming introduced to counter the high cost of fuel and the glut in capacity, and again increase oversupply.
Shorter steaming and also shorter demarcation in ports “generally helps the shippers,” Hoffmann said, and added that so does the trend among carriers toward bigger container ships.
UNCTAD experts are of the view that many carriers will continue pursing measures to enhance efficiency and optimize operations in a bid to reduce unit operating costs. These measures include replacing smaller and older vessels with newer and more fuel-efficient ones, and alliances and cooperation among carriers.
The report estimates that world seaborne shipments, which account for around 80 percent of total merchandise trade, will increase 4.2 percent this year, spurred by the projected expansion of 5.6 percent in global containerized trade. In 2013, seaborne trade grew 3.8 percent to nearly 9.6 billion tons, with the increase boosted by a 4.6 percent increase in container volumes to 1.52 billion tons, or 17.8 percent share of shipments.
The report estimates that last year, world container port throughput increased 5.1 percent to 651.1 million 20-foot equivalent units, or TEUs.
The world’s top container terminal port in 2013 was Shanghai with 36.7 million TEUs, up 12.5 percent. Long Beach, Calif., was ranked 16th with a 44.4 percent increase to 8.7 million TEUs and Los Angeles was 19th with nearly a 3 percent increase to 7.8 million TEUs.