Shippers moving cargo to European destinations may be buoyed by the fact that the freight rates, which in the last 24 months had been moving up in the wake of an “export boom”, has started to decline occasioned by weakening demand and aggravated by an expansion of new capacity in the trade.

Although ships are still reporting satisfactory load factors, the yield has been on the slide much to the concerns of shipping lines and consortia.

Recently, the Far Eastern Freight Conference has set up a working group to consider how best to minimise market disruption as a new service loop and larger ships are introduced.

Industry sources in Port Klang said although lines are playing down the seriousness of the situation, they are anxious over the falling rates.

Sources said the committee set up the FEFC was expected to report back to an principals’ meeting on June 19 on the course of measures to be taken to arrest the decline.

Rates from Asia charged (via forwarders) are said to have fallen between US$700 and US$800 per 40ft box over the past eight months, while direct accounts have seen a considerable decline over the same period as well.

Many lines expect last year’s bumper profits to be wiped out this year as those carriers with new capacity to fill start some hard selling.

The market condition is also being affected a large influx of new capacity on Europe-Asia routes in the coming weeks. It has been estimated that there would be a 10 per cent increase in the capacity in the Asia-Europe trade in the second half of this year.

CMA CGM, with its aggressive expansion plans, is introducing its 6,600 TEUs newbuildings, while the New World Alliance, comprising APL, MOL and Hyundai Merchnat Marine, launched its fourth Asia-Europe loop last week.

There are also questions whether the Grand Alliance will follow with its promised additional service.

Industry sources however said the decline in freight rates has not affected the load factor which for most major operators remain at about 90 per cent.