2011: Frightening Freight But A Mixed Bag
Tuesday, 17 January 2012 | 00:00
In last weeks review of bulk shipping in 2011 it was noted that decent growth in demand was spoiled by too much expansion in supply. In the liner sector the story was a little different. On a global basis supply and demand growth were fairly well matched, but the market was heavily impacted by differing regional trade patterns and an imbalance in capacity growth across the size sectors.
2011s headlines focused heavily on falling box freight rates through most of the year on the biggest trade lanes. Average China-Europe spot rates were down by 51% and China-US West Coast rates by 28%, as western consumers tightened their belts and increasing deliveries of very large containerships continued to bolster supply (26% growth in 8000+ TEU ship capacity). East-west operators felt a sharp impact on their revenues. However, beyond the headlines it was more of a mixed picture, with global trade up by 8% led by the rapidly growing north-south and intra-regional trades (up 10%) where rates largely performed more positively.
A Game of Two Halves
Charter owners experienced more of a rollercoaster ride. Early in the year, boxship charter rates saw upward movement (protected by limited capacity expansion in the small and medium sizes), before slumping in the second half of the year, as liner companies began to cascade down tonnage from the oversupplied mainlane trades to the north-south and intermediate routes (classic users of charter tonnage). Nevertheless, despite charter owners experiencing a fair amount of pain late in the year, average earnings across the year as a whole were up by 23% on 2010, although 10 year old asset values ended the year 26% down on end 2010.
Better Freight Late
As liner companies redeployed mainlane capacity, one piece of the jigsaw refused to fit. Freight failed to improve, hampered by weaker post-peak volumes and a faltering global economy. However, at the very tail end of the year the recalibration of capacity finally began to bite, and rates on the Far East-Europe and Transpacific trades had recovered 26% and 73% respectively of the losses endured in the rest of 2011 by start 2012. Better late than never!
Tick The Boxes
So, there was plenty of pain in the liner sector in 2011, but overall it was probably more of a mixed bag than headlines suggested. Freight rates finally turned at the end of the year, and all eyes will be on whether this was the start of a trend or just part of the pre-Chinese New Year rush. For the next few months, our advice is to watch the box count closely.
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