Container spot rates have picked up during the past two weeks. But supply constraints, rather than growing demand, appear to be behind the upturn.
Void sailings and the removal of tonnage for scrubber installations are reducing available slots for shippers.
SUPPLY-side changes are behind a “mini-recovery” in container freight rates but should not be relied on to provide a permanent solution to box shipping’s structural problems, according to Drewry.
The assessment comes after a recent resurgence in spot rates, which have risen by more than $200 per feu in the past couple of weeks.
While still below last year’s figures, Drewry points out that the third quarter of 2018 was characterised by high levels of blankings, which coincided with rising demand as shippers sought to front-load cargoes ahead of tariff impositions.
Against that background, it argues, rates were always going to be lower this year.
But the recent rise in rates was unlikely to have come from a boom in demand, Drewry noted.
“Volumes were moribund in the third quarter peak season and judging by the continued heavy use of void sailings by carriers that situation has not changed dramatically,” it said.
Rather, it was changes in the supply side that were driving rates momentum, particularly as more ships go for scrubber fitting, increasing the idle fleet.
While an increased idle fleet does not always lead to increased rates, demand was sufficiently strong that supply-side reductions were translating into more positive utilisation and freight rates, Drewry said.
The introduction of new bunker charges during the transition to IMO 2020-compliant fuels is expected to see rates rise further.
“This process is expected to ramp up in December and should contribute to a strong end to the year for carriers, running contrary to what was seen at the end of 2018,” Drewry said.
But while carriers may welcome the upturn in rates, they should bear in mind the “slightly illusionary” nature of the upturn, which was achieved by the removal of tonnage and the introduction of costly new fuels.
“Freight rates will continue to rise on account of higher bunker surcharges, but for carriers the true measure of success will be whether or not they rise sufficiently to cover the additional costs,” Drewry added.