New Tonnage Set for Far East-South America Routes Could Trigger New Box Rate War

Currently, a total of 137 handy neo-panamax containerships of 8,600-10,600 TEU are said to be on order.

Alphaliner has warned that a significant amount of new tonnage is expected to be introduced on the Far East-South America container shipping routes this month, a move that could spark a new rate war, World Maritime News reports.

Some 137 handy neo-panamax containerships of 8,600-10,600 TEU are said to be on order, with a reported 64 units already delivered and another 73 units are due within 20 months.

That will include a "bumper number" of deliveries within the next half year, as about 41 units are due between July and December 2015.

This influx of these ships will reportedly be largely destined for the South American trades, and are expected to be arriving alongside record-low freight rates, and during a period of uncertain growth for Far East-South American cargo demand.

"Although the capacity increase on ECSA (East Coast South America) will be relatively muted, it reflects the weak demand on the trade, with spot rates from Shanghai to Santos falling to a record low of USD 337 per TEU, down some 70 percent compared to a year ago," said Alphaliner.

"Meanwhile rates to WCSA (West Coast South America) are expected to come under pressure in the coming weeks due to the significant capacity expansion on that route."

Five new Far East-WCSA services are expected in July as a result of re-organisation of existing alliances on the trades are implemented.

Total weekly capacity for direct services serving on the WCSA route are reportedly expected to increase to 78,000 TEU by the end of July, up 11 percent from 70,500 TEU in June.

Four new Far East-ECSA services are also expected to be launched, replacing four existing strings, with weekly capacity rising by 1 percent from 44,600 TEU to 45,000 TEU.

Last week it was reported that data from the Shanghai Containerised Freight Index (SCFI) showed that container freight spot rates on east-west routes have surged for a second week in a row, as Asia-Europe market rate reached $879 per 20-foot container, a 60 percent increase from the previous week.