Freight Rates Fall to Record Low
Average spot freight rates fell to a record low last week—$701 per 40-foot container. According to CNBC, the World Container Index (WCI), which tracks 11 global shipping routes, said that is the lowest reading since the organization started tracking rates five years ago and it has fallen 62 percent since last year.
CNBC reported that one of the worst-impacted shipping routes is from Asia to Europe. The Shanghai Containerized Freight Index indicated that shipping costs have fallen 82 percent in just over two months to $211 per 20-foot container.
Philip Damas, director of Drewry, told CNBC that this decline in rates is due to decreased demand in certain markets, such as China, and larger container ship inventory.
Soren Skou, CEO of Maersk Line, agreed, but showed optimism for the future.
"The continued lack of demand and over-capacity resulted in sharply declining rates from the second quarter and onwards," Skou said to CNBC. "We expect the container shipping market to grow a bit more in 2016, but it will still be a challenging year. Not least as over-capacity and a large order book, sufficient for many years of growth, plague the industry."
Damas also told CNBC that exporters looking to cut costs could benefit from these lower rates.
"Rate reductions are spreading across all routes, as the shipping market continues to soften," Damas said in a press release to CNBC. "This is good news for shippers' cost budgets, as the latest average index value of $701 per 40-foot represents an expense of less than 10 cents per kilometer and makes products competitive even in remote markets."