A Tale of Two Trades
By Aiswarya Lakshmi
Tuesday, July 12, 2016
Downsizing of capacity on the Asia-ECSA trade has paid dividends to carriers with much improved freight rates; why isn’t the scalpel also being used on other routes?
In container shipping it is said that freight rates fall much further and quickly than they rise in the opposite direction. Most often a sudden rate decrease will take carriers months, or longer, to painfully recover losses.
However, one trade is currently bucking the trend with an unparalleled spike in prices triggered by significant capacity reductions.
Representative spot market rates for the Asia to East Coast South America trade from Shanghai to Santos have soared by 420% from January to June, according to Drewry’s Container Freight Rate Insight.
To try and explain this massive pricing inflation, Drewry looks at recent developments in the Asia-ECSA trade and see how they compare with events in the Asia-Middle East route, where rates continue to kick along the bottom, and explore some of the reasons why carriers cannot simply copy and paste the tactics from one trade to another.