WITH ship utilization rates falling, shipping analyst Sea-Intelligence said freight rates are expected to fall.

Sea-Intelligence CEO Alan Murphy said that while demand was up 0.6% year-on-year in June, that didn’t change the fact that it was on a downward trend. down since its peak in the 2020 high season.

“So the more relevant question is how demand growth matches deployed capacity. A downward trend in demand can be offset by a decline in capacity injection, particularly in an environment where port congestion leads to significant vessel delays, and in turn results in capacity removal,” a- he declared.

Source: Sea Intelligence

“When we look at capacity deployment on key East/West trades, we can see that while demand growth is slowing, capacity growth is increasing at the same time. For the transpacific, the decrease in the use of vessels is indicated [in the chart]. The sharp decline in May also continued into June, with vessel utilization around the 89% mark. »

Mr. Murphy said there is a correlation between vessel utilization and transpacific spot rates.

“Basically, once utilization hits the 90-95% range for transpacific, that effectively means all capacity is fully utilized and spot rates increase significantly,” Murphy said.

“However, now that we have had two consecutive months where utilization is below 90%, it is clear that the market is no longer at a point that can support extremely high spot rates. We are also seeing a similar case on Asia-Europe and transatlantic as well.

“The bottom line is that average vessel utilization on major head trades continues to be below the threshold that has fueled record rate spikes over the past year and a half. As a result, spot rates will continue to fall.