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Home Freight News Atlantic spot rates about to collapse: Sea-Intelligence

Atlantic spot rates about to collapse: Sea-Intelligence

While freight rates have been dropping consistently on most trades, they have remained at high levels on the Transatlantic due to capacity issues.

However, according to Sea-Intelligence, this is about to change, as carriers are injecting serious amounts of capacity into the trade lane.

From North Europe, capacity growth is scheduled to begin spiking from mid-December 2022, reaching a temporary apex at the end of the month, with capacity growth at 43% Y/Y. Once we head into February, the current deployment indicates a capacity growth of 48%.

Compared to 2019 (pre-pandemic), from mid-December 2022, the operating capacity on North Europe-North America East Coast will shift from being roughly at the same level as in 2019 to being 20% higher.

"And as we get into mid-February 2023, this is poised to jump even further to 30%. However, this is not even the largest increase, as capacity from the Mediterranean will grow at an average of 25% over 2019 in January-February 2023," said Sea-Intelligence's report.

This is at odds with demand growth (or lack thereof), as demand was down by 3.4% Y/Y in Aug-Oct 2022, certainly not warranting the level of capacity injection currently planned, according to the Danish maritime data analysis firm.

Source: Sea-Intelligence.com, Sunday Spotlight, issue 594

In accordance with the calculation of vessel utilisation by matching capacity and demand on the head-haul, (with the assumption that demand continues to decline at the same -3.4% rate), and then matching it against the spot rates, we get the data in figure 1.

"There is a link between spot rates and vessel utilisation, but what is also clear is that there is a time lag of several months," commented Alan Muprhy, CEO of Sea-Intelligence, adding that "given this time lag, and based on the current drop in utilisation, spot rates on the Transatlantic are primed to collapse in the coming months."

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