Will carriers recreate the sucess of this year's rate hikes in 2011?

FREIGHT rates saw a recovery in January this year. Will we see a repeat performance this coming January? Some industry analysts have recently commented that freight rate hikes seem unlikely to happen soon, but some leading carriers, seeing the potential surge in demand at the outset of next year, do expect the same early rate spike will reoccur this time around also.

The world's three largest shipping lines have announced freight rate increments.

Maersk, the world's largest carrier, has announced that the freight rates for Asia-Central America and west coast South America trade lanes will be increased from US$250 to $300 per TEU starting January.

Likewise, Mediterranean Shipping Company (MSC), the second largest carrier, is going to raise rates on various trades with effect from January 1. The suggested increases are $280 per TEU, as well as $400 per FEU and 40-foot high cube containers for trades between Asia and the Caribbean, Central America East Coast, Cartagena, Panama and Venezuela...


CMA CGM has announced rate increases from January 1. Its Asia-North America freight rates will increase by $320 per TEU, $400 per FEU, $450 per 40-foot high cube or reefer and $510 per 45-footer. Rates between West Africa and the Far East, as well as between west Asia and India, will raise $100 per TEU.

For Asia-Europe trade lanes, rate increases announced by carriers are between $500 and $600 per FEU.

Also, the US Transportation Security Administration (TSA) has announced a $400 per FEU guideline rate hike for the 2011-12 transpacific contract season, according to Paris-based maritime agency Alphaliner.

However, according to statistics from the Shanghai Shipping Exchange (SSE), freight rates from China have been shrinking in the past five months. The spot rates have declined by 29 per cent after reaching its pinnacle in July.

Alphaliner analysed that the two key factors - capacity and inventory levels - that led to freight rate increases last year are not seen now, implying that the proposed rate hikes will not succeed this time.

Carriers are reported to be reluctant to reduce capacity in the current winter period and some even continue to add new capacity despite the moderate utlisation levels. Inventory levels have also reached a new record high in the US in November as the peak season was pushed forward this year because shippers ordered the goods earlier than usual.

Alpahliner further pointed out that weekly capacity on the Far East-Europe and Far East-North America routes is now 19 per cent higher than 12 months ago.

Barring further capacity cuts, said a Alphaliner report, there will be sufficient capacity in forthcoming January when shippers rush to move goods before Chinese New Year holidays that start the first week of February.