MSC restricts North Europe-Asia bookings

7/3/2012

MSC intends to restrict bookings on its Silk, Lion, Condor and Swan services from Northern Europe to the Middle East and Far East until week beginning July 9.

The first two services are operated by MSC with vessels averaging 13,000 teu, and the latter two are operated by CMA CGM with ships averaging 12,000 teu. UASC also provides two of the Condor’s 12 vessels.

Neither CMA CGM or UASC have yet announced any similar restriction, implying that MSC has a particular problem with its space allocation to China or the Mid East. The Silk service returns to the Far East directly from Europe, so does not serve the Middle East; the Lion only serves Jeddah enroute; the Condor stops off at Khorfakkan, and the Swan calls at Jeddah.

Interestingly, MSC has so far only felt it necessary to apply a peak season surcharge (US$100 per container from the Western Mediterranean and Adriatic to Middle East and Far East from July 1, 2012), which is an unusual move in itself, suggesting that the eastbound market from Northern Europe is not yet ’ripe’ enough for such a move.

Most ships sailing on the backhaul route from Europe to the Far East are certainly not full at the moment. According to Containerisation International’s Freight Rate Forecaster calculations, average vessel utilisation of all carriers’ vessels sailing from Northern Europe in Q1 2012 was only around 50%. That from the whole of the Mediterranean was an even lower 40%.

Estimated vessel utilization for Q2 12 is little different in either case, with poor eastbound cargo growth being the main problem. According to Container Trades Statistics, cargo growth from Northern Europe to the Far East was only 7.3% in the first four months of 2012, compared to the same period of last year, taking the total up to 1,462,272TEU. That from the Mediterranean was just 1.7%, taking the total up to 648,784TEU.

Some cynical shippers may therefore conclude that something fishy is going on, as thought earlier this year when Maersk took similar action to temporarily restrict eastbound cargo bookings to the Far East. A possible explanation could be that, because eastbound freight rates remain so low, MSC has decided to restrict bookings that involve empty positioning/repositioning. Another scenario could be the need to get empties back to Asia as quickly as possible to satisfy westbound peak season expectations.