Alphaliner: More capacity cuts on the way - it's the only thing that works

Time:2016-06-08 Browse:79 Author:RISINGSUN
PERMANENT cuts to capacity are the only way to revive freight rates at a time of weak demand, and that`s why Paris research house Alphaliner expects more to come.

"Previous initiatives to support rate increases by selectively voiding sailings had proven ineffective, as these efforts only removed capacity on a temporary basis," said Alphaliner.

Current market conditions, on top of the CMA CGM-APL consolidation and the uncertainties posed by Hyundai Merchant Marine and Hanjin Shipping`s financial restructuring, will lead to big capacity reductions, say Alphaliner analysts.

Shipping lines have seen for themselves their own success in pushing up rates by removing one Far East-North European string from each of the four alliances.

This was in addition to the number of weekly services being cut from last year`s 21 loops to its current total of 17, said the report.

While carriers failed to push through their attempted mid-May rate increases to their full extent, they still are currently going ahead with their June 1 hikes.

Whether this is as successful as the increases at the start of May will be revealed on Friday, upon the release of the latest Shanghai Containerised Freight Index, they said.

"This is expected to keep spot rates on the route at above US$700 per TEU, a significant improvement over the $200 per TEU that was offered in the first quarter, when rates on the trade had reached an all-time low," said Alphaliner.