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Price war also responsible for box rate slump.
Patrick Hagen - November 14, 2008
Every year several billion dollars are spent, by Shipping Lines, on empty container repositioning.
The sharp slowdown in demand growth is not the only reason for falling freight rates, said NYK Line Germany managing director Klaus-Peter Barth.
The slump also reflects price cuts by some liner companies that are out to gain market share, Mr Barth told the Hansa Ship Finance Forum.
The price war has pushed spot ocean rates down by as much as $1,000 per teu over the past year, even though ships are still fairly full.
NYK ships, for example, are reporting utilisation rates of more than 90% on the trades out of Asia.
"A rate that one year ago was at $1,250 per teu now is at $250," Mr Barth said.
Some industry sources are hearing of rates closer to $100 per teu as a handful of carriers seek to buy market share.
Mr Barth said that was the only explanation for the plunge in rates.
"At the moment, we are experiencing cut-throat competition," he said. He criticised the container shipping industry for exaggerated reactions to market conditions.
"We love to over-react," he said. "It is sufficient if a vessel on the Asian trade is utilised only by 90% instead of 95% to let the rates drop drastically."
This situation will last for a while, said Thomas Rehder, a Hamburg shipbroker and president of the Hamburg Shipbrokers' Association. "We will reach 2010 before we see a recovery of rates to a sufficient level," he predicted.
In the meantime, the number of unemployed boxships is increasing, with a many now heading for lay-up.
"For containerships, some 60 to 70 vessels worldwide are without employment," Mr Rehder said.
Others are employed at charter rates that only cover ship operating costs plus interest payments for the vessel, he added.
Burkhard Lemper of Bremen's institute for maritime trade and logistics also forecasts a further fall of charter rates in the next months. Relief could be expected at the end of 2009 or the beginning of 2010 at the earliest.
