Trans-Pacific Rate Benchmark Falls 6.7 Percent

Spot container freight rates from Asia to the United States plunged dropping 6.7 percent over the past week, a new sign that excess vessel capacity is eroding rates,

according to Drewry Shipping Consultants.
The Drewry Container Rate Benchmark for a loaded 40-foot container from Hong Kong to Los Angeles fell to $1,636 in the week ending July 11, down from $1,753 the week before. The rate is the lowest since January 2010.
The measure marked the second straight week-to-week decline after the rate benchmark had grown or been stable for most of May following weakening pricing this spring. The July 11 measure was down 37.7 percent from the same week a year ago, when the rate was $2,624 per container.
“The reason is that vessel overcapacity is so severe that even a ‘decent’ peak season surge in demand will not provide enough momentum to lift severely eroded freight rates in the key east-west trades,” said Neil Dekker, editor of Drewry’s quarterly Container Forecaster.
Trans-Pacific carriers due to impose a peak season surcharge into effect June 15 had already postponed it for at least a month. OOCL announced last week it would delay the surcharge until Aug. 1.
Drewry Maritime Research is forecasting average east-west ocean freight rates, excluding fuel, will drop 20.8 percent in 2011 from 2010 for during a period when container volumes have remained strong.
Facing weaker freight rates, carriers in the New World Alliance suspended one trans-Pacific service this month. Hyundai Merchant Marine, APL and MOL are cutting one weekly string of vessels, each averaging 3,960 TEUs, in the Pacific Southwest service.
Drewry bases its eastbound benchmark rate on an average of spot rates from non-vessel-operating common carriers in Hong Kong each week
Eastbound spot freight rates only apply to about 10 percent of trans-Pacific container volume, since most cargo is priced at a rate set under the annual contracts.
Source: Journal of Commerce