Drewry predicts that container freight rates from Asia to the East Coast of South America (ECSA) are heading downward after box growth on the lane ended 2014 in a deficit.
Preliminary annual figures show that box volumes on the southbound leg fell by 1.8% in 2014 to 1.5 million twenty-foot equivalent units (TEUs). The drop, said Drewry, comes as a surprise considering how the Latin America region was considered to be a “hot-growth region,” and carriers and terminals subsequently invested heavily with bigger ships and larger port facilities.
The Asia-ECSA southbound trade had grown by 8.5% in 2013 and by 5.6% during the first quarter of 2014, but the speed of decline accelerated from the second half of the year.
The slump was seen in almost all the Latin America regions. Asia to Brazil traffic—accounting for three-quarters of the total Asia to ECSA volumes—was down by 1.7% to 1.1 million TEUs, while volumes to the Plate region of Argentina and Uruguay fell by 2.4% to reach 370,000 TEUs.
The sharp decline in Asia-ECSA volumes has not been matched by a commensurate reduction in capacity, which has inevitably harmed carriers’ ship load factors and spot freight rates. Drewry estimates that average ship utilization sunk to around 80% in November and December last year, some 10 points down on October’s assessment.
Moreover, carriers show no sign they plan to downgrade their ships in this trade, and the 10,622-TEU CMA CGM Tigris became the largest vessel to call at Brazil on February 6 when it docked at the Port of Santos.
Neither has there been any let-up in terminals expansion in the region, said Drewry. EcoRovias will spend US$75 million on three ship‐to‐shore (S-T-S) gantry cranes among other equipment purchases for the Ecoporto Santos Container Terminal. This is despite reported handling rate discounts of between 15% and 25% following significant new capacity being added to the much bigger Brasil Terminal Portuario and Embraport sites.
At Itapoa, around $180 million will be spent at Tecon Santa Catarina on eight more S-T-S cranes and other expansion projects that will increase the terminal’s capacity to 2 million TEUs, while two terminals in Manaus (Chibatao Container Terminal and Superterminais) are also being upgraded.
In Argentina, Tecplata Container Terminal has started operations, although as of yet no carriers have included it on their schedules. The ICTSI-run facility has a first-phase capacity of 450,000 TEUs.
The effect on pricing was clear as Drewry’s Container Freight Rate Insight reported that Shanghai to Santos spot rates fell to $2,490 per 40-foot container in December, down from $3,530 per 40-foot in November. Rates for the same lane in January 2015 were little changed, suggesting that the same weak market conditions have persisted into this year.
“Southbound Asia-ECSA rates will struggle to recover as carriers do not seem willing to accept the weaker trade fundamental and alter their capacity allocation accordingly,” said Drewry.
Photo: JorgeRioBRAZIL
