Strong rate rebound predicted by several analysts
Submitted by TCC on 16 March, 2011 - 09:45
Several financial analysts have recently voiced that they believe freight rates are poised for a rebound in 2011.
Following was reported in Xinhua News on 14 March 2011:
Most research houses believe that oil price surge and the increase in vessel supply will not derail the growth of container shipping. DBS Group Research said, "as long as the rising oil prices do not result in demand destruction and falling production, we will not be too bearish on container liner fortunes. "
According to shipping consultant Alphaliner, idle capacity is only slightly less than 2 percent of existing fleet. Moreover, supply pressure could be mitigated by new orders cancellation, slippage and scrapping.
Indeed, with the U.S. consumer confidence remaining on uptrend, retail inventories at historic lows and declining unemployment, as well as Europe's Purchasing Manager Index, retail sales, and consumer spending also heading north, research houses expressed optimism upon global trade, and especially the Asia-U.S. trade route, which will in turn bode well for container shipping sector.
As such, CIMB Research said "our view is that (freight) rates have the potential to rebound quite strongly in the next three months and that the longer-term fundamental outlook for 2012 to 2013 also remains robust."
There were already indications pointing to container freight rates poised to turn up after recent weakness. Singamas, the Hong Kong listed manufacturer of containers, had warned recently that a shortage of containers could happen again in April or May, as trades picked up and that the shortage could continue until 2012, as it is not so easy for the container manufacturing companies to turn on full capacity due to tight production capacity control.
Nomura International also suggested should not read too much into the recent doldrums in container shipping sector. First quarter is traditionally the weak period due to a combination of end-of Christmas demand and the shutdown of factories before Chinese New Year, and thus the current freight rates are reflecting the lack of demand.
"We believe freight rates are likely to have bottomed. Once ( Chinese) factories return to normal production, we expect freight rates to rebound. In fact, we believe there may even be a surge in freight rates as pent-up demand could be building as factories have yet to return to full operations after Chinese New Year," said Nomura International.