A rate crunch for carriers and forwarders implies an opportunity for customers

The tough market environment for container rates may be taking a toll on freight forwarders but it is hardly benefitting shipping lines either.

The latest quarterly results from Hapag-Lloyd for example show that underlying demand is perfectly respectable, with the company seeing a 6% increase in container volumes over 2014. Revenue however fell by 4.3% year-on-year, illustrating the scale of the rate crunch, although admittedly much of this was driven by the fall in the dollar against the euro.

The company commented that it had only “been possible to implement the necessary freight rate increases to a limited degree” continuing to observe that “in 2014, freight rates in the various trades are likely to fluctuate considerably in some cases.”

Of course the underlying cause of the condition, as Hapag-Lloyd admits, is that there are simply too many ships. The latest newsletter from Alphaliner notes that “The growth of the employed containership capacity has reached its highest level in three years, fuelled by a surge in vessel deliveries and a reduction of the idle (unemployed) fleet.” None of this is very new or surprising.

What is more difficult to understand is why freight forwarders are not making big profits in such a climate. DP-DHL said in its results last week that “ocean carriers are effectively controlling supply and demand. For example, available capacity is effectively limited by adjusting travel speed, whilst the rates agreed upon are increased.” Yet this is flatly contradicted by the likes of Hapag-Lloyd who say that they cannot make the rate increases stick.

More efficient vessels and a price of oil drifting lower ought to see both sides benefit.

The only conclusion that can be drawn from the results of both the shipping lines and the forwarders is that customers are increasingly successful in playing one of against the other; exploiting the shipping lines desperation for cash by dealing directly with them and cutting-out the forwarders who in-turn can only respond by following rates downwards.