Shipping consultancy Drewry said in a recent report that more capacity cuts are needed to keep load factors and prices up as spot rates level off in the Asia-East Cost South America (ECSA) routes.
Drewry noted that carriers went through major downsizing earlier in the year as a result of a sharp decrease in trade. Despite bigger ships joining the southbound slot, capacity in September was 38% lower year on year, while the number of operators dipped from 13 to 10.
Further, the consultancy estimated that ECSA inbound ships have been operating at near full capacity since May, which led to 100% growth in freight rates which have not been seen in the last couple of years.
However, market conditions went back to the doldrums in July and August despite sustained demand, suggesting that the neck and neck competition among carriers is driving down rates.
“No other container trade has suffered anywhere near as harshly as the Asia to East Coast South America trade has this year. Following a 9% decline in volumes last year, the trade is on course to see that deficit possibly even double this year,” Drewry said.
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