<<As the idle container ship fleet hits an all-time high, freight rates could recover in 2016 as retail stocks are depleting in Europe amid strong retail sales.
In a report issued Monday, CIMB Securities analyst Raymond Yap said that freight rates may recover if those strong Europe retail sales outpace the ability of container lines to put idled ships back into service.
"Faced with weak demand and surplus capacity, carriers are finally taking strong action to address the freight rate crisis. A high level of idling is expected to prevail until May 2016, after which carriers tend to redeploy capacity in the approach to the summer peak,” Yap said. “If Asia-Europe demand picks up over the next six months, freight rates could recover as it takes time for carriers to redeploy their vessels."
Asia-Europe volumes fell 4.7 percent year-over-year during the first nine months of 2015, after growing 8.1 percent year-over-year in the same period last year.
"The restocking done in 2014 caused the EU retail sales-to-inventory ratio to rise to very high levels despite robust retail sales, and the European Commission’s indicator of the retail industry’s intention to place orders subsequently declined,” Yap said. “The effect spilled over into 2015 and was one of the reasons behind the fall in trade volumes."
The other major reason for the drop in shipments was the effect of Western sanctions and the drop in the price of oil on Russia, which caused Russia’s ruble to depreciate significantly and pushed Russia's economy into recession. Asia exports to Russia and the Black Sea economies collapsed by around 30 to 40 percent this year as a result. The weak euro also affected Europe imports. The last time Asia-Europe volume fell was in the second half of 2012, when it declined 6.8 percent year-over-year. At that time, the key reason was the very weak Euro purchasing managers index, which had been below 50 points for the past year.
Meanwhile, the fleet of idle container ships has hit 1.4 million 20-foot-equivalent units as of Nov. 30, a level just below the 1.5 million TEUs idled during the global recession in 2009, and representing 7 percent of the in-service fleet.
Structural overcapacity persists, as the industry gravitates towards mega-ships that continue to flood trade lanes with excess capacity.
Between 2008 and 2015, container shipping demand grew by a cumulative 36 percent (including 2009 when demand fell 9.6 percent year-over-year), but the nominal container fleet rose a cumulative 87.6 percent.
"Therefore, carriers need to rely on various other tools to manage oversupply, mainly slow steaming, skipped sailings and idling. While slow steaming is well entrenched, idling levels fluctuate wildly, because it is a measure that carriers take only reluctantly and only when freight rates reach crisis levels,” Yap said. “As such, freight rates will continue on a path of exaggerated yo-yo volatility for the foreseeable future."
A version of this story originally appeared on IHS Maritime Fairplay, a sister product of JOC.com within IHS.>>
Fuente: JOC.com, http://www.joc.com/maritime-news/container-lines/container-freight-rates-may-improve-2016_20151223.html