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Container Charter Earnings Level Off in July
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Container Charter Earnings Level Off in July

August 10 ------ After a pattern of divergence at the start of the year, July saw a modest realignment between charter and freight markets in the container shipping sector, the research and consultancy firm Maritime Strategies International (MSI) said.

Following an impressive run since the end of 2017, time charter earnings have levelled off in recent weeks, a slowdown that began with smaller feeder vessels and has now spread to larger units. While the charter market slowdown is partly seasonal, the lower level of activity comes against a backdrop of service withdrawals which will impact larger units, Daniel Richards, Analyst at MSI, explained.  “For feeder vessels, where there have not been notable service reductions, it is more likely that liners are holding back for other reasons: either to take some steam out of the market, or out of prudence given potential trade war effects on regional trade routes. We now see limited upside for charter earnings over peak season given moves by liner operators to restructure services and restrict capacity.”

Freight markets saw an improved performance over the past month, even if holding onto recent gains is proving difficult. Week 30 of 2017 proved the peak for mainlane spot freight rates, which then declined over peak season.  MSI expects 2018 will avoid this trend, and that Transpac rates over peak season will be around 10-15% above 2017 levels, and Asia-Europe around 5%. Improving freight rates, while a positive development, remain vulnerable to rising costs, Richards said.  “Higher volume growth and more aggressive capacity management are the obvious drivers to improved levels, but these gains will be largely eroded by growing bunker costs, however, and liners will struggle with profitability for the remainder of the year.”

In MSI’s view, short-term mainlane growth will improve, but will not be able to reverse the impacts of weak growth so far this year.  While the noise around the imposition of trade tariffs focusses on the mainlane trades, their potential impact will be felt more widely, Richards said, adding that the key area to watch “is how far tariffs on US imports risk disrupting complex cross-border supply-chains.”

Source: worldmaritimenews.com