Present freight rate levels are not expected to improve during the first quarter of 2011 and may prove to be sticky going into second quarter if the fundamental supply-demand imbalance remains a drag on freight rates. Too much tonnage is suppressing utilisation levels down to 80 percent, leaving little room for upside risk. However, downside risks still remain very real even though inflow of new tonnage is close to getting matched by demand growth.

In the light of the firmness of average freight rates in 2010 that took many by surprise, freight rates are likely generally to stay lower in 2011. The strong market on Asia-Europe during the first quarter of 2010 is very unlikely to happen again. In combination with a second year of high capacity inflow of tonnage suitable for Asia-Europe, that trade and the ones affected by eventual cascading, will feel most of the heat. Certain sub-segments and trades are likely to be squeezed as cascading takes its toll.

Meanwhile, containerised imports to US from Asia are in for a more positive year - rates may hold up better than Asia-Europe freight rates, but still go down. Overall, BIMCO expects Asia-US freight rates to be more stable due to the contract structure of the trans-Pacific trade as well as an expectation that US imports volume-wise should go up as the US economy gets into more sustainable territory.

Bunkers remain a crucial cost element in particular for containerships, and since the beginning of October, bunker prices have increased by 22.5 percent by the end of January. This made liner companies push for an increase in the fuel surcharge known as bunker adjustment factor (BAF). This may be the main reason for the minor positive hiccup in Shanghai spot rates across the board taking place in the early weeks of 2011.

 

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