“Rates are unlikely to be lifted as volumes are down so much, and there is still new capacity coming on stream,” Hackett said.
“G6 [Alliance carriers] have cut 15% of their capacity. I believe [Maersk Line] is just trying to hold the rates where they are.”
Plummeting demand on the Asia-Europe trade led Maersk Line to announce further capacity reductions on the Asia-Europe route last week, following the 9% capacity reduction the line made earlier this year. The carrier says it has now cut capacity on its Asia-Europe network by 21% in 2012 so far.
Maintaining rates, or at least halting their fall, on the key Asia-Europe route was behind Maersk’s move.
The key issue now is the reaction of other carriers to Maersk’s capacity cut. The temptation is for other lines to grab market share, undermining any positive effect on rates by, in effect, undoing the sector’s overall capacity cut.
“This is a cut-throat industry,” Hackett said. “Someone will go for market share and then things should get interesting.”
Basic economic laws would dictate the deepsea lines’ future, Hackett said. “The basic principles of economics are at play here. When supply sharply exceeds demand, the price curve shifts.
“The fact that the carriers held together in the second quarter of this year was remarkable for the industry, but some carriers are still talking of placing new orders. Ultimately, economic principles will rule.”
SeaIntel analyst Lars Jensen said: “If other carriers use this to try to grow market share at the expense of those who pulled capacity, then the upturn will be very short-lived, as I would expect the carriers which, responsibly, have pulled capacity to reactivate their tonnage quickly.”
A very short-lived upturn would not bode well for anyone. The one thing lines cannot control is weak European demand.
Container Trades Statistics data shows that European imports of containerised goods from Asia fell 10.8% year on year in August, after slipping more than 13% in July. Declines in the Mediterranean sector were even sharper, with falls of more than 20% on some routes.