Carriers give away $200 per teu in Asia-Europe contract rates

Shipping lines have signed lower contract rates on the Asia-Europe and headhaul transpacific trade lanes this year, according to Drewry’s Container Forecaster report.

Asia-Europe trade Drewry

In its second-quarter report, Drewry estimated that in 2014 transpacific carriers have given away $1.3bn in annual revenues on contracts signed with beneficial cargo owners for the headhaul trade alone. 

On the Asia-Europe trade lane, annual contract rates are around $150-$200 lower per 40 ft than in the prior year. 

Drewry said the shipping lines had signed the contracts at lower levels to fill their ships, but warned it would put pressure on carriers to recover revenue from the spot market, which is expected to remain volatile. 

The analyst said the lower freight rates would also widen the gap between the financial results of carriers that have focused on cutting costs and the rest of the top 20 lines. 

“While supply and demand remain key drivers of freight rates across all trades, those carriers cutting their costs are also better equipped to offer lower rates and in real terms they are in fact passing back these benefits to their customers,” it said. 

“Industry unit costs per teu are forecast to decline by 2.5% this year and strategies such as slow steaming, redesigning networks and buying bunkers in Russia are crucial to this, but carriers will struggle to make a profit since we are also forecasting unit revenues to decline by a similar amount.”