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Freight rates up on long-haul lanes as capacity withdrawn

Sentiment for rates on long-haul routes has turned positive for the first time since August. Vessel utilisation has been beyond expectations and Maersk has had to deploy extra loader services.


THE Alliances withdrawal of the EC4 US East Coast service in November will also help to reduce oversupply on the lane. On the Asia-Europe side, FAK rate hikes have helped push rates up, supported by capacity cuts.


The Shanghai Containerised Freight Index (SCFI) showed that Shanghai-US West Coast rates closed at US$1,746/FEU, up from US$1,735/FEU the week before. However, the Shanghai-US East Coast rate remained under pressure, dropping to US$2,198/FEU, from US$2,230/FEU the previous week.


Shanghai-Northern Europe rates also grew to US$581/TEU, from US$562/TEU the previous week.


Consultancy Linerlytica remarked in its report on 23 October, Market sentiment has turned positive for the first time since August, with momentum building for the November freight rate hikes as further capacity cuts are forthcoming after THE Alliance decided belatedly to suspend the EC4 service to the US East Coast via the Suez in November. This follows earlier cuts made by various carriers on the USWC and Europe routes that have helped to elevate carriersrate restoration efforts.


Despite the more bullish sentiment, Linerlytica stressed that the sustainability of the increased rates depends on liner operatorscapacity discipline.


Linerlyticas statistics show that the idle fleet has dropped slightly in the past week, with only 67 units of 265,591 TEU currently inactive, with several idle units already resuming active service, while four ships were scrapped in the past week.


Linerlytica said, At least 1 million TEU of excess capacity that needs to be removed over the next two months in order for the rates to stick. The task will be made more difficult by the over 500,000 TEU of new deliveries scheduled to be delivered before the end of the year, which will require more ships to be idled upon delivery.


Capacity at shipyards remains steady with just over 200 units for 834,784 TEU currently in drydock. Several owners are making use of the current market slowdown to upgrade their fleet with Maersk, Mediterranean Shipping Company and Hapag-Lloyd all undertaking vessel upgrading programs.


Linerlytica said, The recent rise of ships in drydock has helped to remove some of the excess capacity but it also means that more refurbished ships will be returning to the market next year even as scrapping rates remain stubbornly low.


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