Sea Intelligence Report Freight Rates expected to Decline on Lower Vessel Utilization

The sea intelligence CEO, Alan Murphy recently said that even though demand across the globe grew by 0.6% year-on-year, a downward trend has been observed after the 2020 peak season. He further added that it is important to know how demand growth matches up against deployed capacity and how a down surge demand trend can be squared off by a down surge insertion of capacity, particularly where port congestion results in significant vessel delays and leads to capacity removal.

He points out that there is a correlation between vessel utilization and spot rates on the trans-Pacific and mentions that once utilization gets into the 90-95% range for the trans-Pacific, it effectively means all capacity is fully utilized and spot rates increase dramatically. He further states that for two subsequent months where utilization is below 90%, it shows that the market is no longer at a point that can sustain the high spot rates.

The average vessel utilization on the major head-haul trades lingers to be below the verge, fuelling the record rate peaks over the past year and a half, and as consequence spot rates will continue to weaken.