Drewry: Europe-ECSA Freight Rates Still Falling

As freight rates in the Europe-East Coast South America trade continue to fall amid weakened ship utilisation, carriers on this trade will have a long wait for the rates to rebound and will have to consider making some capacity adjustments sooner rather than later, according to shipping consultancy Drewry.

Southbound container traffic from North Europe and the Mediterranean to the East Coast of South America decreased by 17.4% year-on-year in April, Drewry cited statistics from Datamar. The latest result means that the trade has now seen 12 consecutive months with annual growth deficits as slowing economies in Brazil and Argentina continue to supress demand.

The Datamar figures show that exports from the Med to ECSA have suffered the most with container volumes down by 17.6% Y/Y after fourth months of 2016, versus 12.7% for North Europe exports.

The Northbound leg of the trade has exceeded the TEU count of the southbound leg in 11 of the past 12 months on record. Datamar numbers for April show that northbound container shipments from ECSA to North Europe and the Med rose by 4.4% year-on-year, aided by the depreciation of currencies in the Latin American exporting countries. As well as becoming the dominant leg of the trade, the growth trend for the northbound voyage is the polar opposite of the southbound with April’s result representing 12 straight months of year-on-year growth.

The Mediterranean market has been at the forefront on the northbound renaissance with volumes up by 24.6% year-on-year after four months of 2016. In comparison volumes from ECSA to North Europe have risen by 5.7% although it remains the bigger trade in TEU.

The rolling 12-month average clearly shows the different trends of the south and northbound legs with the former slipping further downwards at -12% in April, while the latter is powering along at 8%, according to Drewry.

“Given the grave state of freight rates on this trade it is somewhat surprising that carriers haven’t done more on the supply side, but the monthly slot count has barely changed in the first five months of 2016. Neither have lines engaged in many void sailings with only three counted thus far. The consequence is that the average ship utilisation on the southbound leg continues to be below half-full, while even in the stronger northbound trade ships are at best three-quarters full,” Drewry said.

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