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Shipping freight rates continue to fall

Shipping freight rates continue to fall


The shipping freight industry is filled with boom and bust cycles, and 2015 is experiencing one of the most severe busts in memory. Rates that were skyrocketing on a daily basis in 2008 are now so low, boats are not even able to make up their daily expenses. A transportation lawyer understands that these cycles are natural, but can be incredibly devastating for those who face losing their Chicago businesses while waiting for the market to turn.

Why it is happening

According to the Wall Street Journal, overcapacity is one of the shipping freight industry’s biggest problems. Too many investors have built too many vessels, so everyone is being forced to work for bottom dollar. The most typical vessel, the capsize, costs an average of $13,000 to own and operate every day. However, most vessels are only taking in around $4,300 each day. A Chicago transportation lawyer may recognize that this is largely occurring because of slowing economies around the world in addition to overcapacity.

Price fixing allegations

Some claim that the only logical reason for the current drastic dip in prices is that the biggest players in shipping were price fixing. However, an investigation by U.S. regulators found that no price fixing was actually occurring. Now there are concerns that a new alliance between the largest players, which was approved by U.S. officials, would allow those big shippers to control freight rates by forcing the smaller business out. They would simply be unable to compete due to cost and capacity.

To address these issues, officials from the U.S., China and the European Union met in Brussels recently to assure the industry that price fixing was not occurring. However, many market experts believe that further consolidation is one of the only things that may turn the tide for the industry.

Potential for Hope

There is hope for those who are suffering through the depression in the industry. Demolition rates are way up in 2015, indicating that fewer vessels will be occupying the waters. This may be due to shippers who have simply given up on their business interests, or because a large number of ships are finally being pulled out of service for age and sold as scrap metal. Clarkson Research Services reports that 4.6 million dead weight metric tons of these ships have been scrapped so far in 2015. That represents a 368 percent increase from all of 2014.

Those who would like to learn more about how these falling shipping rates can affect their businesses should contact a transportation lawyer in Chicago. Their legal understanding of the boom and bust cycles usually seen in the industry may help businesses know what to expect and know how to handle the future.

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