[010112.EN.SEA] Rates Plunge As Shipping Giants Reject Mass Layups To Stop Rate Slide

RATES between Shanghai and North Europe fell US$10 per TEU to $490 per TEU, according to the Shanghai Containerised Freight Index while spot rates on the route were nearly 65 per cent down from the start of 2011.

Carriers have suspended Asia-Europe services, amounting to 3.4 per cent of global fleet capacity at 526,000 TEU, according to BIMCO's December Market Review, but that's only a third of the 1.5 million TEU laid up at the end of 2009 when steps were taken to stop the rate slide.

"Carriers saw this as a temporary blip in demand, but were left with too much capacity. Market share retention strategies kept them from pulling out capacity," said analyst Rahul Kapoor, of the Singapore-based merchant bank, RS Platou Markets.

"I do not see a hope for Asia-Europe at this point of time. I don't see spot rates rising back to $750 per TEU, but that wouldn't really be a recovery," he said.

Chinese exports to the EU have fallen much faster month to month than they have to the US, said Mr Kapoor.

China Customs said November exports to the EU increased five per cent year on year, less than a quarter of the growth in July and August.

European November exports were up 3.5 per cent year on year, but were 0.14 per cent lower than in September, according to Container Trade Statistics.

September volume on the route was 0.52 per cent lower than a year earlier. Indian ministers blame the EU's sovereign debt crisis for slowing export growth in November to 4.2 per cent from 30 per cent in November 2010, reported Newark's Journal of Commerce.

Mr Kapoor said vessel utilisation on the trade lane has fallen below 80 per cent from the 85 per cent to 90 per cent utilisation seen in the first half of the year.

Source : HKSG.