As the world's containership freight rates plunged to a record-low level, shipping companies are fretting over their business prospect.
Even though second and third quarters of the year are usually the busiest season for the industry, their profitability is not commensurate with expectations due to low freight rates and slowly rising oil prices.
Hanjin Shipping and Hyundai Merchant Marine, Korea's top shipping companies, have managed to turn to the black in the first quarter, but industry watchers said their good fortunes may be short-lived.
On June 19, the Shanghai Containerized Freight Index fell to a record low of US$556.72 per 1 twenty-foot equivalent unit (TEU). This is almost a half of what it used to be last year ($1,069). The Asia-Europe lines saw the largest fall of all other lines. The per-TEU average containership freight rate for the lines declined 15 percent last week to $205, down 83 percent from that early this year. Only six months ago, the rate for carrying a 20-foot container was as high as $1,200.
The Asia-Mediterranean lines whose per-TEU rates were as high as $1,400 early this year fell 12 percent last week to a low of $274. Shipping industry analysts said the break-even point for the Asia-Europe lines is $800. For the 24 weeks of the year to date, however, the number of weeks with the rate in excess of that threshold level was nine. A shipping industry official said, "The actual shipping rates are even lower than those offered during the 2008-2009 period when shipping demand was at a historic low."
The biggest reason for the tumbling shipping rates is overcapacity. Major European shippers such as Maersk, MSC, and CMA-CGM are slashing their rates based on ultra-large fleets. The number of ultra-large containerships over 10,000 TEU plying the world's waters is 63, up more than 10 percent in terms of loading capacity from last year.
