GENEVA — Transportation experts believe a combination of new shipping capacity entering the market and orders for large container vessels already in the pipeline can reduce international shipping rates.
“I think there is a slowing down of freight rates, and in the medium term, they are likely to stay at the same levels as today or drop a little,” said Carlos Canamero, head of cargo transport at the United Nations Conference on Trade & Development.
“I do not think they will go up,” he said, adding that more ships are in use as ship owners are still putting in new building orders.
The decline signals a turnaround from the recent price boom ocean-freight carriers have enjoyed and some have given early warning that the slowdown is already affecting the bottom line. Last month, Denmark’s A.P. Moller-Maersk, the world’s largest container shipping company, revised its profit outlook for 2006 downward, partly because of “increased bunker costs and further reductions in the average freight rates.”
According to estimates by the National Bank of Greece, global freight volume in 2005 reached $380 billion. NBG shipping analysts Frangiska Voumvaki and Maria Savva in a report on the Greek shipping sector concluded that “it appears that freight rates in the sector are well past their peak and could decline precipitously as ship production is rapidly catching up with high global demand.”
In their report, Voumvaki and Savva said that while freight rates have come down from the boom levels of 2003-2004, they “still remain above their 10-year averages.”
China and India’s fast growth in exports and thirst for imports “have provided a major boost to shipping,” the NBG analysts noted, and those developments are likely to buoy the industry.
According to Chinese press reports, China Cosco Holdings, the country’s largest container shipping company, recently said it expected freight rates to rebound in the second half of the year, as cargo demand has posted double-digit growth. Freight rates dropped by 13.5 percent in the first quarter.
China’s exports increased in 2005 by 28 percent to $762 billion and India’s rose by 19 percent to $89.8 billion, according to World Trade Organization data.
The latest world economic prospects forecast by the U.N. pegged world merchandise trade to grow by 7 percent this year and expects exports of dynamic developing countries, such as India and China, to “continue to grow faster” than rich countries.