Spot freight rates in container trades set a new low in May for a second consecutive month as “brutal competition” plagues the market, a senior shipping analyst said.
Spot rates in the sector fell by 2% in May from the previous month and general rate increases the industry had introduced in Asia-Europe trade to take effect from the beginning of May were quickly wiped out, said Jacob Pedersen, senior analyst at Sydbanken in Denmark.
“A picture of brutal competition is increasingly dominating and the total lack in price discipline will, without of doubt, negate a lasting success of rate increases in the region of USD800 to USD1,000 in Asia-Europe trades from 1 June,” he said in a monthly report on the shipping markets.
“The development in May is again an indicator that rate falls this year can be deeper than what had been expected only a few months ago,” he continued. Control of capacity and network optimisation would be needed to address the situation, although the forthcoming peak season will provide some relief to the sector. Laying up tonnage remains a necessity if owners want to restore freight rates to healthier levels, although Pedersen called such a move unrealistic.
Meanwhile, Container Trade Statistics, the UK based consultancy, said that its container freight rate index that covers both spot and contract rates, fell by three points to 76 in April. This was the sharpest fall since the beginning of 2014, according to a chart on the company’s website. The index has lost five points since the beginning of this year and nine points since April 2014, the chart shows.