LOWER volumes in the post-Chinese New Year lull in the Far East have caused spot rates on the Asia-north Europe market to dip below US$900 per TEU.

Vessel utilisation, prior to the Lunar New Year holidays, was also lower than in previous years, with January spot weaker than those reported in the last two years, according to Alphaliner.

Despite the freight rate weakness on the spot market, carriers are still operating profitably on the Asia to North Europe routes due to the increase secured for 2015 full-year contract rates, as well as the savings derived from the fall in bunker costs.

In January for example, average fuel oil prices were 54 per cent lower than a year ago, allowing significant savings for carriers.

Although bunker prices have rebounded slightly, from a low of $250 per tonne in January to $320 per tonne currently, carriers are still enjoying significant savings compared to 2014, when bunker cost averaged at $560 per tonne over the whole year.

Based on Maersk Line's total 2014 bunker consumption of 8.8 million tonnes, the carrier would enjoy savings of over $2.1 billion from the fuel oil alone this year, based on current prices.

There is still room for carriers to cut freight rates further, as supply and demand conditions remain challenging due to the rapid delivery of new ships.

Compared to Asia-Europe, the situation on the Far East-North America trade is more uncertain, due to the on-going port congestion on the US west coast that will take three months to clear.

While the Transpacific Stabilisation Agreement (TSA) carriers are proposing a $600 per FEU rate increase on March 9 and a further $600 per FEU increase on April 9, spot rates on the FE-USWC route have fallen by $250 per FEU to below $2,000 per FEU after the Chinese New Year holidays.

The rate drop illustrates the difficulties that carriers face as they continue to battle significant capacity pressure.