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Demand increase outstripping supply growth in container shipping

Demand increase outstripping supply growth in container shipping
Bimco sees a brighter outlook for the container shipping with demand growth now outstripping supply growth, but also warns that “serious overcapacity remains”.

In Bimco chief shipping analyst Peter Sand’s latest report on the container shipping market he noted that the demand side continues to improve on a global scale.

“Demand-side growth is outstripping supply-side growth now, which is something that improves the fundamental balance in the market. This difference is 1-2%, not a landslide change from one day to the next, but a most welcome move in the right direction,” Sand said.

On the Asia – Europe trade an improvement has been seen in spot rates with the average for January – August 2014 at $1,281 per teu some 19.5% higher than the same period in 2013. However, on the transpacific Asia – US West Coast trade rates have fallen 14% over the same period.

With the container trade now into its peak season Sand noted it was “off to a good start” on key trades from Asia.

“On 1 August, freight rates went higher, as supply matched the demand situation well. Bimco expects the spot freight rates to resist last year’s constant slide from early August to end-October on Far East to Europe,” he said.

Despite deploying 41 new ultra-large containerships on the tradelane this year and the number of idle vessels at a three-year low, rates are back above the breakeven point.

However, looking at the Asia - US West Coast and US East Coast trades the report noted that they “seem exposed to a gradual deterioration in freight rates as the peak season passes”.

Concluding though Sand said that despite the positives “serious overcapacity remains”.