Alphaliner: Spot Freight Rates Likely to Fall Further

Liner spot rates on the Asia-North Europe market have dipped below USD 900/teu due to lower volumes in the post-Lunar New Year lull in the Far East, according to industry analyst Alphaliner.

Since the beginning of this year, weaker utilisation levels have driven down spot rates on the Far East-North Europe route despite carriers’ attempts to impose general rate increases (GRIs) ranging from USD 500 to USD 850 per teu from 15 March.

As explained, vessel utilisation, prior to the Lunar New Year holidays, was also lower than in previous years, with January spot weaker than those reported in the last two years.

However, despite the freight rate weakness on the spot market, carriers are still operating profitably on the Asia to North Europe routes.

Alphaliner attributed this to the increase secured for 2015 full-year contract rates, as well as the savings derived from the fall in bunker costs.

In January average fuel oil prices were 54% lower than a year ago, allowing significant savings for carriers. Although bunker prices have rebounded slightly, from a low of USD 250/ton in January to USD 320/ton currently, carriers are still enjoying significant savings, Alphaliner’s data show.

The industry analyst believes that a further weakening is expected for the coming weeks.

“There is room for freight rates to fall further: Firstly, current bunker prices are some 40% lower than the 2014 average. Secondly, some 120 newbuildings of over 8,000 teu are due to be delivered in 2015, inevitably boosting capacity supply on the main east-west tradelanes,” Alphaliner went on to say.

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