Drewry sees less “rate erosion” in 2007-2008
Drewry sees less “rate erosion” in 2007-2008
Despite strong demand for container transport “in the east/west headhaul trades, ocean freight rates are in decline and costs continue to increase,” Drewry Shipping Consultants said in a new report.
The London-based firm said in its 251-page Annual Container Market Review and Forecast that freight rates may fall this year by about 6.3 percent, but that “rate erosion should be significantly less in 2007-2008 since much of the present decline has been triggered by competitive activity rather than vacant ship slots.”
“Market sentiment has played a big role in rate contract negotiations with shippers this year, guided by the perception that capacity would wildly overshoot demand growth,' Drewry said. 'In reality, demand in some key trades was much stronger than expected.”
Carriers have successfully “managed to prevent too much tonnage from being cascaded into the north/south routes, but it will be a primary concern not to destabilize the secondary east/west trades where demand growth remains strong,” the consultants add.
With carriers taking delivery of large numbers of new ships, and profits falling, Drewry suggests more carriers may sell and charter back ships as a way to free up cash.