Transpacific rates plummet as demand dries up, capacity remains high

TRANSPACIFIC sea freight volumes are estimated to decline by one per cent this year compared to 2010, with peak season volumes having "completely fizzled out and cargo volume growth has been negative since June", reports Alphaliner.

It said shipping lines` efforts to "impose peak season surcharges have failed completely and current spot rates on the trade are 36 per cent lower than in the same period last year".


It said that within the next two months 17,000 TEU of weekly capacity, or six per cent of current capacity on this major trade lane is to be removed, following the suspension of four more Far East-US west coast strings. Seven services have already been halted since April.


"Despite these capacity withdrawals the utilisation rate, which currently stands at an estimated 90 per cent, is expected to keep falling until the end of the year. Further withdrawals will be required before any rate recovery can be expected," it said.


Alphaliner also said carriers engaged in the transpacific trade are anticipated to suffer a collective loss of US$300 million this year.


"Some smaller carriers will come under increasing pressure to withdraw or substantially scale back participation in the trade. Competition has been especially severe since the decline in demand coincided with the entry of several new carriers into the transpacific trade and the introduction of new vessel capacity."


Smaller ocean liners, including Matson, Grand China Shipping, Hainan PO , TSL, PIL and Wan Hai, have already taken measures to lower their exposure to the trade in the wake of severe losses in the second quarter.


Shipping lines TCC and CSAV have withdrawn completely from the trade, and Horizon Lines is said to be reviewing its participation in the transpacific trade, said Alphaliner.