Alphaliner: FE-ECSA Rates Hit Rock Bottom

Poor market conditions have prompted freight rates in the Far East to East Coast South America (FE – ECSA) trade to fall by 90% over the past twelve months, eroded by weak demand and low capacity utilisation, Alphaliner says.

Rates were slashed from over USD 1,000 per TEU, recorded in January 2015, to today’s record low of only USD 113 per TEU from Shanghai to Santos, according to the latest SCFI assessment from 5 February.

The lowest rates in the market have reportedly dropped below USD 50 per TEU, as capacity utilisation averaged only 70% in January with no pre-holiday rush before the Lunar New Year.

“These rock bottom rates are forcing Maersk Line, MSC and MOL to rationalise their Far East – ECSA offering by merging two loops into a single service, effective mid-February. This rationalisation move follows last year’s decision by PIL, K Line, HMM and Yang Ming to shut down their joint SSA/AESAL/NHX/SA1 loop in October,” Alphaliner explained.

Combined, the closure of these two services sees FE – ECSA weekly capacity cut by about 23%, compared to September 2015. Following the latest rationalisation exercise, only four weekly strings will be retained on the FE – ECSA route. These provide an overall weekly capacity of only 35,000 teu – the lowest offering recorded on this trade since 2009. Despite the rather massive capacity reduction, continued weak demand on the sector will make carriers’ efforts to raise freight rates to a more sustainable level rather challenging.

As a result, Alphaliner expects the average size of vessels deployed on the four remaining FE – ECSA services to soon reach 8,800 teu, a remarkable jump of over 100% since 2009.

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