Container freight rates on the rise

For the first time since mid-2008, average global container freight rates experienced a year-on-year increase in late 2009, according to Drewry Shipping Consultants’ December 2009 Container Freight Rate Insight report.

The Drewry Global Freight Rate Index recovered by 3% in the year to November 2009, after collapsing in the first half of 2009, increasing by 18% between July and September and rising by another 6% between September and November 2009. Between September and November 2009, the global “all-in” container freight rate index rose from US$2,040 per 40ft container to US$2,160, maintaining a trend of price rises that has lasted for more than six months.

Recent average global freight rates in late 2009, however, were still around 20% below the peak of 2007,Drewry said.

“On routes such as Asia to Europe, the year-on-year increase in spot rates amounts to at least 40% and we know from shippers that they were asked to agree to much higher freight rates under annual contracts renewed in early 2010,” said Philip Damas, director of Drewry Supply Chain Advisors.

“January and February are a critical period for many shippers because a high proportion of annual contracts are renewed then. Having access to reliable market price benchmarks will enable shippers to set their negotiating objectives. Some shippers are worried that they are asked to pay higher freight rate levels and are unsure whether the requested rates are at or higher than market benchmark levels,” he added.

Drewry believes that the potential for further increases in spot freight rates is now generally limited, except for the transpacific trade. It expects a sharp increase in spot transpacific rates as new capacity reductions can still stimulate some significant rate recovery in that trade. A tighter supply-demand balance should push up transpacific spot rates in early 2010 despite the growing percentage of the fleet being laid up.

Contrary to spot rates, Drewry expects contract freight rates to go up significantly when compared to the low levels of previous contract deals. With spot freight rates now consistently higher than a year ago on most trade routes, contract negotiations taking place in early 2010 will be influenced by a different market environment and upwards pricing pressures.

Drewry has forecast for some time that average container freight rates, including fuel surcharges, will be about 15% higher in 2010 than in 2009.

While import spot rates to Europe continued to rise between September and November 2009, the same cannot be said about import spot rates to the US, which have remained stable at low levels, Drewry said.

Carriers have announced further rate increases on the Far East-to-North Europe route for January or February, typically of US$250 per TEU, and also plan to raise Asia-to-US freight rates this month.

Source: JOC