Transatlantic shipping capacity glut leads to lower rates

A huge injection of Transatlantic capacity from May exceeded demand growth, leading to softened freight rates.

In its latest Container Insight Report, Drewry Maritime Research commented that westbound trade growth should be relatively healthy for the remainder of this year due to currency factors, but it would not be strong enough to cater for the new tonnage meaning that carriers would need to cut back if they wanted to force through rate increases.

Drewry said: “Our previous assessment of the Transatlantic trade appears to have been too bullish. In May we said that we expected westbound trade growth to be sufficiently strong to keep up with the additional supply being introduced. However, while volumes have continued to rise steadily, they have not grown at the pace required to match the four new services that have been added.”

Drewry added that ships that were running full on the westbound leg in March and April, from May were only around 90% full on average, leading to a softening in freight rates.

“The arrival of four new services in almost the blink of an eye, plus the upgrade of two existing services with Transatlantic headhaul capacity increasing by an estimated 18% in May, both month-on-month and year-on-year, was an almost unprecedented injection of slots into a major East-West trade,” said Drewry.

The resultant impact on industry load factors and spot freight rates is already being felt and Drewry has heard rumours that carriers are already considering pulling one of the new services to try and rectify matters.