Shippers Anticipate More Rate Fluctuations in 2014

Much like 2013, analysts predict 2014 as a year of modest growth in demand and excess capacity. This is anticipated to lead to repetitive and short lived rate increases during peaks in demand.

While growth in demand remains sluggish, container lines in global operations continue to position themselves for the long term, ordering large vessels with capacities of 8,000 to 18,000 20-foot-equivalent container units. The industry has been marred with an overcapacity issue for a couple years now, and will likely remain so until possibly 2016. According to researchers, global vessel capacity has increased 37 percent since 2008, but demand has grown only 16 percent in the same time period. The result has been volatile and short lived rate increases seen nearly monthly in 2013.

While rates fluctuate up and down according to seasonal demand, there has been a downward trend over the past year. Carriers have tried everything possible to manage capacity, including slow-steaming, capacity reductions during seasonal periods of slack demand, occasional cancellation of single sailings and increased vessel scrapping. Regardless of these measures overcapacity has persisted. Due to this, rates have been averaging anywhere from 14 to 23 percent lower in 2013 than the year prior on U.S. imports.

Cargo growth in 2014 is expected to increase modestly as the U.S. economy improves. U.S. imports are anticipated to grow about 6 percent over 2014, better than the TSA’s expectations of 3 to 4 percent in the trans-Pacific. With global capacity likely to increase more than 7 percent this year, the gap between capacity supply and demand will narrow marginally.

Although supply-demand economics are interesting, the big story in 2014 will be structural changes in the shipping industry. In order to reduce costs and operate more efficiently, carriers are expanding existing vessel-sharing alliances and forming new ones, such as P3 and G6 alliances. How these alliances ultimately shake out in the trans-Pacific will have a significant impact on capacity, and most definitely will affect the rates they provide in 2014. Stay tuned.

This entry was posted in Blog and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *


118,994 Spam Comments Blocked so far by Spam Free Wordpress

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>