Ocean freight rates on the rise: rates for marine cargo could increase as much as 18 percent in South America's east coast routes in the upcoming months.

Author:Fernandez, Rebeca
Position:LOGISTICS: OCEAN TRANSPORT
 
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In the next year, ocean freight rates may increase, as the effects of the 2009 financial crisis and the industry's overcapacity stop pushing down the prices at the maritime transport market.

In an interview with Latin Trade, chief analyst at the Infrastructure Services Unit of the UN Economic Commission for Latin America and the Caribbean (Eclac), Ricardo Sanchez, predicted a small but significant recovery in the value of ocean freight rates, especially in the continent's east coast routes. Sanchez expects rates to increase gradually over the year, to stabilize at the beginning of the last trimester of 2013, and then to rise again at the beginning of 2014.

The revaluation of currencies in the continent will considerably drive up trade in the region; I will say around 7 percent on imports and 6.5 percent on exports. This will have an impact on on ocean freight rates, which could result in an increase of 18 percent in South America's east coast routes," says Sanchez.

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Such recuperation would set prices almost at the same level they were in November 2012, before they tumbled 25 percent. According to Sanchez, the upturn should be credited to the route's characteristic dynamism, as well as the incursion of container shipping companies into the reefer business.

However, these factors alone will not contribute to the predicted rise. After a 2011 price war caused freight rates to fail precipitously, maritime companies have changed their business strategy to one that allows them to make profit and not just gain market share.

General Rate Increases (GRIs) have been implemented by different shipping companies in order to restore the freight rates levels that had dropped drastically in 2009 and 2011. "Rates in 2012 were still very low and had become unsustainable for the industry," says Michel Donner, senior advisor of Drewry Consultants, which specializes in ports and shipping. Donner expects more attempts to implement GRIs this year.

There is also the issue of rising bunker prices and...

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