Goldman Sachs: Rate decline caused by 37pc bunker price drop

Time:2015-06-17 Browse:54 Author:RISINGSUN
INTERNATIONAL investment bank Goldman Sachs links plummeting Asia-Europe freight rates to falling oil prices and says we shall see it bottom out before the end of the month.

"We attribute the weaker rates year-to-date to the 37 per cent decline in bunker prices year-over-year, with lower fuel surcharges, and liners` reluctance to reduce the number of services while introducing new larger ships as each liner replaces their smaller, original vessels with larger ones on the route," the investment bank said in a research note.

Goldman Sachs said that it expects the second quarter to be the low point for the Asia-Europe route, though it expects profitability to return during 2016, reports Vancouver`s Ship & Bunker.

The industry`s move towards larger containerships was noted to already be exacerbating the issue of overcapacity, a situation that could be compounded as 630,000 TEU of capacity in 10,000 TEU sized vessels is scheduled to hit the water throughout the rest of 2015, making it harder to cascade existing smaller ships into other trades to make way for the larger vessels.

Last week Maersk Line predicted that small and mid-size players would simply be squeezed out of the market, reported Newark`s Journal of Commerce.

It is not only the box markets suffering from low rates, and last month it was predicted that waning demand from China would send dry bulk rates crashing, a problem which would require the industry to take responsibility for addressing overcapacity.