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To
Southeast Asia the rate is now just $227
per TEU. On the route from Shanghai to Busan
it is $209 per TEU. The rate to Kaohsiung
is just $225 per TEU, while the Shanghai
to Hong Kong freight rate stands at just
$82 per TEU.
Late
last year we conducted a study on the Northeast
Asia to Southeast Asia trade, within the
Intra-Asia market, to get an idea of the
potential for profit, based on a bunker
cost of $650 per ton.
The
study was also conducted under the assumption
that the carrier was operating time chartered
vessels. The vessels used for the calculation
were in the 4,000 TEU range.
At
the time of the study, which was October
2012, we found that carriers needed a freight
rate just under $600 per TEU to cover the
costs of the head and backhaul voyage.
The
rate at the time fell woefully short at
roughly $380 per TEU. However, it may have
been possible for the carrier to breakeven
or even manage a slight profit based on
the backhaul voyage if the line is able
to book enough cargo at a decent rate.
Nevertheless,
the headhaul rate at the time was well above
the Shanghai-Singapore freight rate today
of just $227 per TEU.
If
operating costs have not changed much from
October of last year, then we can safely
assume that the lines are losing a lot of
money on the trade now.
Therefore,
the strong growth rate is of little consequence
if rates are falling.
Of
course the lines using larger ships will
fare better, presumably, given their lower
unit costs.
It
will be a very difficult operating environment,
based on the above data, particularly for
the carriers that derive a bulk of their
income from the Intra-Asia trade.
The
only hope that these players have is for
some serious capacity cutbacks
by the
lines that are now throwing in larger ships.
There is always the chance of course that
demand surprises on the positive side. But
it would have to be a very significant surprise
to turn the current situation around.
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