News / Intra-Asia rates spiralling as carriers continue to add capacity

Intra-Asia shipping rates have fallen to levels that are barely profitable for operators – but they continue to add capacity, despite the lull brought on by Chinese New Year.

Drewry’s Intra-Asia Container Index shows rates now average $557 per 40ft, 7% lower than a fortnight ago, and 17% down year on year.

The Shanghai-Singapore route registered the largest drop, 12%, to $717 per 40ft, followed by Shanghai-Tanjung Pelepas, which fell 8%, to $1,149per 40ft.

Drewry said: “Current rates are squeezing the margins of carriers. Drewry expects this downturn to persist until carriers implement more effective capacity management.”

MSC will launch a new Firehorse service connecting Shanghai, Ningbo, Singapore, Surabaya, Semarang,Singapore, Shanghai from 5 March. It will turn in 28 days and will deploy four 2,500 teu ships, starting with the 2,546 teu MSC Palatium III.

MSC will also launch a the Kouprey service, connecting Sihanoukville, Singapore, Sihanoukville, on 27 February with the 1,708 teu Sea Star 1 as part of an upgrade of its intra-Asia services.

Xeneta’s chief analyst Peter Sand told The Loadstar that carriers were generally indifferent to profitability on local or regional routes, which “serve a bigger purpose; inter-regional profitable business. Those are the feeder and shuttle services of top carriers,” he explained.

“Freight rates on some intra-Asia trade lanes, will never be profitable. The competition is immense and the business proposition that should require a profitable premium isn’t around, nor is it required.”

While these factors make it difficult to exercise ‘capacity discipline’ on intra-Asia lanes, the current high charter rates, even for feeder ships and vessels below 3,000 teu, remain a barrier to entry for new players.

Mr Sand said: “That’s probably also why Hapag-Lloyd acquired Zim this week  – to get access to such capacity, at a ticket price a tad lower than the charter market.”

The Loadstar reported yesterday that Hapag-Lloyd’s Zim takeover bid includes the latter’s Hong Kong-based intra-Asia shipping affiliate, Gold Star Line.