Freight rates are on the up.

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In a previous blog I explained that I didn't believe that the shipping lines low freight rates combined with decreased cargo volumes in many trade lanes were sustainable.

I have been watching with interest the publicly listed shipping lines report their quarterly results to the stock market and it's giving an insight into just how severely some of them have been affected. Some have suffered spectacular record losses and others falls in profit of 80% or more as a result of the downturn. Rates and cargo volumes have been down to such an extent that it has threatened the viability of many carriers. Financial defaults are growing. Last month the "Gem of Madras" was arrested in the USA as her owners had fallen behind in their loan repayments to the Nordea Bank.

"Rate restoration, GRI(general rate increase) and peak season/fuel surcharges" are the language the carriers are using again. The container operators have started lifting rates from between US$100 to US$300 per TEU(twenty foot equivalent unit) as of the 1 July in various trade lanes.

The rules of supply and demand are being leveraged. Higher demand has been created as numerous ships have been taken out of service and are currently idle. The vessels that have remained operating are starting to achieve higher utilisations and thus higher rates can be asked by the lines. Here is a link to a BBC story on ships currently rafted up in the UK.

I think the big question is whether or not there is a second or even third wave of the GFC coming due to decreases in consumption from growing unemployment and continued pressure on credit markets and on top of that, government stimulus actions being wound down.

One thing is for certain. Freight rates are starting to head north again...as they must... if we are going to be left with decent shipping services around the world.