NEPTUNE Orient Lines (NOL) has reported a 22 per cent hike in average freight rates from the beginning of the year in period four—April 3 to April 30—on the back of continued strong demand in the second quarter, according to CIMB Research.
The average freight rate across all trades in the period rose to US$2,669 per FEU, marking the fourth straight period of growth for the company, a recent report published by the investment banking group said.
While stronger-than-expected Asia-Europe rates have helped push the average freight rate up, NOL says that the increase has also been aided by solid growth on the transpacific and Intra-Asia trades, which should help to offset fears of a decline in Asia-Europe business, given the gloomy economic outlook in Europe now.
Further increases are expected from June onwards, CIMB analysts argue, thanks to the success of the transpacific annual contract negotiations this year.
"Investors can expect more freight rate upside once the new rates from the transpacific contract negotiations take effect, and the likely implementation of peak season surcharges given that TP [transpacific] demand continues to be strong and spot rates show no signs of fatigue,” the group said.
Woori Investment and Securities analysts agree.
"Despite the resurgent financial crisis in Europe, we forecast that operating profit at shipping companies will expand on increased container traffic in 2Q and higher freight rates,” the analysts said.
The primary risk to this recovery, however, remains the economic climate in Europe, as alluded to above, where recently the euro began to depreciate—a fact which could ultimately affect imports to region.
"Short term sentiment for container shipping is very strong. However, in the medium term we are increasingly worried about the potential consequences that the European economic turmoil might have on consumer demand,” analysts from DnB NOR Markets said in a recent report.
Source : TCSM, 04.06.10.
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