Container lines facing $13.3 billion loss as rates fall

 29 Mar 2011     Carriers

  • Major container lines could lose up to US$13.3 billion unless they can push up rates

  • Analyst claims average freight rates will fall by 28%

Major shipping lines could lose an estimated US$13.3 billion in revenue for the coming year, as freight rates continue to fall and shipping lines unwilling to increase rates, according to SeaIntel Maritime Analysis.

SeaIntel predicts rates could fall by as much as 28%.

The statistics are taken from the freight rates of the Shanghai Shipping Exchange, which measures the development in spot rates on main trades out of Shanghai.

SeaIntel voiced their concerns that these figures could become a reality within other existing major trade routes, with one analyst telling IFW, "most other trades globally have been seeing consistent declines.”

“If we assume an average Top 10 carrier has 25% of its volume locked into long-term contracts at 2010 levels, valid until 2012, and we further assume that other trades only decline at half the rate of the main haul – 14% – the carrier would still face an average freight rate decline of some $380 per FEU in 2011," the analyst added.

“Any decline in the freight rate is passed right through to a [carrier’s] bottom line,” the SeaIntel employee concluded.

SeaIntel estimate that the ten largest container carriers would transport 35 million FEU (Forty-foot Equivalent Unit) this year. Taking these figures and their estimate of an average rate decline of $380 per FEU, turnover would fall dramatically resulting in damaging net losses for the financial year.

The latest Shanghai Containerised Freight Index shows prices on the four main trade lanes fell in the week ending 20 March from the week before and rates are now at their lowest point since September 2009, according to IFW.

Planned rate increases look unlikely as long as shipping lines fail to reduce capacity.