SeaIntel: ​Low Vessel Utilization Puts Pressure on Freight Rates

Decreased freight rates in the Transpacific Eastbound trades, which were hurt by low vessel utilization, could continue in the fourth quarter of the year, according to a report by SeaIntel.

Despite a demand growth of more than 10% year-on-year, the recently-ended 2017 peak season saw Transpacific freight rates seriously underperform expectations as carriers deployed vessels which were simply not full.

“2017 utilisation on the Transpacific has only breached 90% in September 2017, and only marginally so, and with healthy demand growth the only logical explanation is excess capacity,” SeaIntel informed.

Quarterly capacity levels in 2017 were set to significantly surpass that over previous years, primarily as carriers have almost abandoned the use of blank sailings as a tool to manage capacity.

“This also provides support for the concerns we have raised in recent weeks of excess capacity for 2017-Q4, where the Q/Q capacity growth far exceeds the average of the past five years,” SeaIntel said.

While the relationship between nominal utilisation and SCFI spot rates is not as pronounced in the Asia-Europe trade as in the Transpacific trade, there is still a quite strong link, with utilisation levels driving spot rate levels.

Data further supports the challenges carriers have faced in raising freight rates in the 2017 peak season, as utilisation levels hovered around 83% in April-July 2017, but tumbled to 75% over the next two months. Spot rates started falling immediately after, dropping to an average of 783 USD/TEU in September.

“With volumes bound to drop in the fourth quarter relative to Q3 and capacity levels remaining high due to low levels of blank sailings, carriers are looking at a rather challenging freight rate environment in the fourth quarter,” Alan Murphy, SeaIntel CEO, said.

Share this article

Follow World Maritime News

In Depth>

Events>

<< Aug 2018 >>
MTWTFSS
30 31 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31 1 2

TRANSTEC 2018

TRANSTEC 2018 welcomes participants to explore Russian Ports and Shipping development opportunities…

read more >

Europort 2018

From 15-17 May 2018, the 12th edition of Europort Romania willl take place in the IDU Hall in Constanta…

read more >

SMM 2018

This is a must-attend event – a unique opportunity to meet key players, display business strengths, establish new contacts and exchange…

read more >

Defence Safety Conference Supported by The Defence Safety Authority, UK MoD

The Defence Safety Conference is the first of its kind exclusively dedicated to safety across the defence domain…

read more >