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An index of spot shipping rates on 11 trade routes between Asia, Europe and the United States has fallen by 62 per cent in the past year.Aaron McKenzie Fraser/Bloomberg

Too many ships amid a soft economy have sent ocean-going container rates to new depths.

An index of spot rates on 11 trade routes between Asia, Europe and the United States has fallen by 62 per cent in the past year, according to Drewry Shipping Consultants, which has published the World Container Index since 2011.

"There's been an arms race in building bigger and bigger ships and they're coming at a time the economy is slowing," said Jonathan Chappell, an analyst at Evercore ISI in New York.

Demand for consumer goods, which generally move by container, is not as weak as China's demand for metals, but it is softer than it's been in years, he said by phone.

An oversupply of massive new container ships serving the China-to-Europe routes has pushed smaller ships to the Atlantic Ocean and depressed rates between North America and Europe, said Andrew Abbott, chief executive officer of Atlantic Container Line (Canada) Ltd.

He calls the plunge in container rates "a bloodbath."

"All of these big [shipping] lines have added so many ships, it's gotten out of control, totally," Mr. Abbott said from New Jersey. "They're killing each other on the Asian trade because that's where all the big ships are going. And as they bring on a big, big ship on the Far East-Europe run … they've been sticking those [smaller ships] in the Atlantic and dropping the prices accordingly. It's actually squeezed us a lot."

A slowdown in Chinese economic growth has hammered the global shipping industry, which exited the Great Recession to take advantage of low interest rates to buy new ships to handle a rising amount of coal, iron ore and consumer goods. But as China's factories scale back and the economies of Europe and North America gear down, the amount of cargo traversing the oceans has slowed.

The cost of shipping industrial commodities such as coal, ore and grain recently hit record lows, according to the Baltic Dry Index.

To handle the oversupply of ships, a record number of bulk-commodity vessels – almost 100 – was sent to the wreckers in 2015 even as scrap-metal prices fell. But more than 300 more must be taken out of service before the global fleet size matches demand, according to IHS Global and Clarksons Platou.

Container rates between Shanghai and Rotterdam and Genoa are at new lows, while the cost of moving a container to Los Angeles is slightly above the record low, Drewry said on Thursday.

"Rate reductions are spreading across all routes as the shipping market continues to soften," said Philip Damas, a director at Britain-based Drewry.

While the low rates are sending shipowners into bankruptcies, they are good news for the companies that sell their goods to overseas markets. The average rate of $701 (U.S.) to ship a 40-foot container is less than 10 cents a kilometre and allows companies to compete in remote markets, Mr. Damas said.

Atlantic Container, which has called on Halifax since 1970, is partly cushioned against the plunge in container rates by its fleet of five ships that carry more than just containers, said Mr. Abbott, the CEO. The ships, which serve the East Coast and Europe, have decks for 1,300 autos, in addition to heavy machinery and other equipment that is driven on and parked. "It protects us from the ups and downs of the general market," Mr. Abbott said.

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