NOL freight rates sink in 3Q

The shipping company suffers as firms shy away from building up inventory with a 2.5% drop in volumes.

Freight rates, meanwhile, declined 2.3%

NOL’s latest numbers “douse(d) all optimism” about containership freight rates getting a 5-7% boost in 3Q11 despite expectations of a delayed peak season, according to DBS Bank.

The bank estimates NOL ‘s recorded average freight rate to remain flat at US$2539/FEU and its carried volumes to increase by a mere 1% from 2Q11 to 700,000 FEU in the third quarter.

DBS said the low utilization rates reflect the liners’ inability to pass through any peak season surcharges.

The bank although seasonal declines in 4Q volumes might be moderated by firms’ decision to depend on “just in time” shipments, “freight rate decline is unlikely to be stymied unless there is a coordinated response by liners to lay up capacity.”

“While idle fleet has crept up to 2.3% of total fleet now, it will take much more to plug the c.3% gap between supply and demand likely in both 2011 and 2012, unless economic conditions improve dramatically,” DBS said.

The bank also estimates NOL to suffer from a to US$75m net loss for 3Q11 on the back of sky-high bunker prices as freight rates remain dismal.

DBS has also revised its net loss forecasts for FY11 and FY12 to US$242m and US$91m, from its earlier net loss projections of US$126m and US$48m, respectively, on weaker freight rate assumptions.