Lines may need to close some Asia-Europe services

3/4/2018

Liners alliances may be forced to close some services on the Asia-Europe trade due to excess capacity as the current orderbook of ultra-large containerships (ULCs) enter service, according to one analyst.

With some 1.42 million TEU of 20,000+ TEU vessels due for delivery in the coming years, megamax capacity additions will also reshape the power balance between the three major alliances on the critical Asia-Europe lane, according to SeaIntel.

In its latest report, SeaIntel said that as the newbuildings entered service, the Ocean Alliance − one of three huge global alliances that now dominate the east-west container trades, consisting of CMA CGM, Cosco Shipping, Evergreen and OOCL − would gradually match the Asia-Europe capacity market share of 2M by 2019, and surpass it in 2020. THE Alliance, however, consisting of Hapag-Lloyd, Yang Ming, and Ocean Network Express, was forecast to gradually lose market share.

“THE Alliance will see their capacity market share decline from 25% to 21%, while Ocean Alliance will gradually match the 38% capacity market share of 2M by 2019, and then gradual surpass them in 2020,” said the analyst.

If HMM confirms their rumoured order, they may reach a capacity market share of 6-7% in 2021, while the alliances will see their shares drop correspondingly.”

Even if 2018-2021 demand is expected to outpace that of 2012-2017, SeaIntel concluded it would likely be necessary to close one or two services to balance supply and demand.

SeaIntel CEO Alan Murphy said that while estimating future demand growth was fraught with difficulties, industry consensus suggested that demand growth would be better in the coming years than in 2012-2017.

“If this is the case, then closing three services would seem like overkill, but balancing supply and demand would probably necessitate the closure of 1-2 services, depending upon the underlying demand growth,” he added.