Capacity utilization is slipping across all key trade routes with 3 out of the 4 main tradelanes falling below 90%. Despite this, carriers are pushing ahead with new service launches with a new Asia-North Europe service and 3 new Asia-South America services to be launched next month including a new China-Mexico service that will feature 7 new Asian entrants to the Mexican market.
The unabated demand for ships is keeping the charter market high despite the freight market slump that has driven the SCFI down by a further 15% last week. The gap between freight rates and charter rates have widened further, with the charter to freight rate ratio reaching a record high of 289%. If cargo demand fails to rebound to drive a freight rate rally, a charter market correction could be due soon.
Johnson Leung
US efforts to revise domestic shipbuilding
US efforts to revive its shipbuilding industry will achieve little traction despite the USTR’s proposal to impose a levy on Chinese built ships as well as remissions for operators using US built ships. There are currently only 63 US-flagged containerships, accounting for just 0.9% of the global fleet of 6,874 ships currently. Only 25 of the US flagged ships were built in the US primarily to serve the Jones Act trades, while the rest of the 38 ships were built outside of the US. Maersk, CMA CGM and Hapag-Lloyd are the 3 primary operators of these foreign built ships that are part of the Maritime Security Program (MSP) and Voluntary Intermodal Sealift Agreement (VISA) schemes that provide the US government access to these ships during national emergencies in exchange for retainer fees as well as priority access to Department of Defense (DoD) cargo. The USTR proposals are not expected to attract interest apart of these existing operators of the US flagged ships due to the prohibitive costs involved that will make these ships uncompetitive outside of the US market.
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