[300614.EN.SEA] London Conference: Analysts Bleak On Rate Equilibrium Before 2016

ANALYSTS speaking at the Container Supply Chain Conference in London predict that freight rates will remain volatile and bearish for several years on the major trade lanes, reported Lloyd's List.

Drewry Maritime Research director Martin Dixon said that even if global demand rose as expected by five per cent this year and six per cent in 2015, up from three per cent in 2013, it would not be enough to balance supply growth.

"The industry will fail to reach any sort of equilibrium until 2016," he said.

Mr Dixon said this would force carriers to miss sailings and ramp up efforts to implement general rate increases more frequently to strengthen rates, while bolstering collaboration with alliances to reduce capacity.

"Average freight rates fell six per cent last year and we anticipate further falls this year," Mr Dixon said, adding that carriers were managing this loss of revenue by curbing unit costs.

"Overcapacity will plague the industry for several years to come and unprecedented freight volatility will continue."

The concentration of new orders for larger ships was of most concern to those seeking greater stability owing to the cascading effect it was having on the secondary regional deep sea trades.

Orders for ships larger than 24,000 TEU could begin in 2016, as the design for an 18,000-TEU ships, said Andrew Penfold, project director at Ocean Shipping Consultants.

"Since 2010, we have seen a rapid increase in the average size of vessels on north-south trades," he said. "Generally speaking, the ports and terminals in these markets have not been ready for these vessels, which has resulted in upsets to schedules."

Mr Penfold predicts vessels sizes would only need to expand marginally to 430 metres in length and 62 metres in width, which he said would have a limited impact on draft because average box weights were light.

The main technical challenges to making a major jump in box ship size would be maintaining the manoeuvrability of vessels and ensuring quay walls were strong enough for the container gantries needed to handle these ships.

Source : HKSG.