Lloyd's List 3/9/07

FREIGHT rates for containerized cargo are steaming ahead, driven largely by European demand.

The latest global container freight rate index from Drewry Shipping Consultants provides firm proof that strong cargo volumes are feeding through to freight rates that have finally recovered to above levels of a year ago before the markets started to slump.

Over the past two months alone, the index has recorded what Drewry brands a dramatic increase as the global average soared from $2,288 per 40ft container in May to $2,581 in July.

This was the largest percentage change in a two month period recorded in the past couple of years, according to Drewry which compiles its index from freight forwarders representative all-in rates on 38 major US and European routes. The rates include origin and destination terminal handling charges.

In July 2006, the global freight rate index stood at $2,440 per feu, and then slumped to May's low point before the recovery set in.

The most stunning bounce was recorded in the index covering European imports, with average freight rates leaping almost 30% over the past two months from $3,114 per 40ft box in May to $4,041 in July,

Just four months earlier, this figure had been down at $3,080.

Commenting on the latest numbers, Drewry said the European trades have continued to show harder freight rate trends than the US trades.

Although much of the resumed strength of container freight rates comes from the Far East to Europe trades, several intra-Asia trades have also seen price increases of more than 40% between May and July.

Some eastbound and westbound transatlantic freight rates have strengthened somewhat during the past few months, although westbound Atlantic rates remain much lower than a year ago, Drewry noted. Higher bunker charges have also pushed rates up.

The firm said most significant finding of its Drewry Container Freight Rate Insight bi-monthly report was the sharp increase in the European import index, mostly reflecting the general rate increase implemented by carriers on the Asia to Europe route on July 1. The market accepted average increases of about $250 to $300 per teu in forwarder base rates on this route. In addition, bunker charges rose from $256 per teu in May to $312 per teu in July.

After the success of the July 1 restoration, the Far Eastern Freight Conference said Friday that members would be seeking further increases of $200 per teu for general cargo on October 1, along with a $350 hike for reefer cargo.

At the same time, the high cube surcharge will be raised to $300 per unit on the same date.

Because of unprecedented volumes and exceptionally high utilisations which are forecast to continue into 2008, FEFC lines have also decided to extend their peak season surcharge on both Mediterranean and North European routes until mid-February.

Export trades remain flat, though, with Drewry's index for European outbound cargo only rising by 4.8% in the last two months to $1,224, less than a third of rates for import cargoes.

The FEFC is now introducing a new eastbound tariff in October that is designed to deliver greater transparency to the pricing process in the hope that this will bring much needed stability to the trade.

On the Atlantic, the remaining five members of the Trans-Atlantic Conference Agreement are recommending an eastbound rate increase of $240 per 20 ft container for traffic moving via Atlantic ports, and $400 per 20 ft container for cargo shipped from the US Gulf and Pacific gateways.

While westbound volumes on the Atlantic have under-performed so far this year, eastbound cargoes to Europe continue to improve, Taca lines said, and vessel utilization remains high.