Box lines retain Asia-Europe capacity as demand resumes

11/13/2017

Lines will risk freight rate declines through the winter slack season by maintaining service levels on key trades, according to Alphaliner.

The analyst said total capacity on the Asia-North Europe route in the fourth quarter would be up by 11%, year on year, with only a limited number of blanked sailings planned for the winter slack season. Over the previous four years, carriers have made sizeable capacity cuts through void sailings or service suspensions, but this year “strong volume growth has given carriers the confidence to retain additional capacity in the trade”, said Alphaliner.

“After ten blanked October sailings for the Chinese National Day ‘Golden Week’ holidays, only seven blanked sailings are currently scheduled for the months of November and December.”

Of the seven forthcoming blanked sailings, three are scheduled on CMA CGM’s ’FAL-SEANE’, a new seasonal service launched in July this year which, with a fleet in the size range of 4,700 to 5,100 teu, deploys the smallest ships in the trade and limits its Far East coverage to South East Asia.

Another three void sailings are scheduled for mid-November sailings on the 2M ‘AE2/Swan’, the OCEAN Alliance’s ’NEU3’ and the ‘FE2’ of THE Alliance. However, on the European end of these three services, the schedule gaps from the skipped sailings will all coincide with the Christmas holidays in December, limiting the market impact of the omissions.

“The limited capacity cuts should remove any concerns about space shortages, even though demand has picked up very quickly after the October holidays in China,” said Alphaliner. “Capacity utilisation has rebounded to 95% in the last week of October, with only a mild fall in that month despite the higher capacity on offer.

“Spot freight rates from the Far East to North Europe have rebounded in the past two weeks, as carriers pushed out a fresh round of rate increases after suffering a 33% drop since July this year.”

“Whether carriers will be able to retain the firmer rates as the fourth quarter progresses remains uncertain, as their reluctance to withdraw capacity will likely weigh heavily on any efforts to raise rates.”

However, Alphaliner said there would be significant pressure on backhaul eastbound rates, which this year surged to record high levels. “China’s 2018 import ban on certain classes of plastic scraps and wastepaper will affect all voyages with an ETA in China from 31 December,” said the analyst.

“The impact on eastbound volumes will thus be felt as early as November, when ships on the first affected voyages set sail from Europe.

“The ban could potentially erase all volume and rate gains obtained on the backhaul route so far this year.”