Asia-Europe shippers 'over a barrel' as carriers use capacity crunch to hike rates
Shippers wishing to book space on container vessels from North Europe to Asia are still ...
Ocean freight carriers have cut capacity on Asia-east coast North America (ECNA) routes, reporting unprecedented drops in slot supply, after headhaul volumes fell for the first time in five years.
According to Drewry, the year-on-year decline, of 1.1% in the second quarter was the first since the final quarter of 2011.
The capacity cuts come despite the Hanjin crisis, as the maritime consultancy noted that Hanjin supplied just 79,000 of 1.71m teu along the east coast.
“Compensating for this 4.6% share of the market was not so difficult as the Asia-ECNA loaders at the start of September were not as full as those heading to the western shoreline,” it said.
With US east coast volumes – 85% of the ECNA market – falling 2.4%, Drewry said the decline was most likely due to a slowdown in US imports, resulting from a contraction in consumer spending.
“When making year-on-year comparisons, there are still the lingering effects of the US west coast port disruption in early 2015, which resulted in shipments for a while switching to east coast services,” said Drewry.
“But these have more or less worked their way through the statistical system, and it is clear that import growth into North America has been slowing.”
Growth between Asia and North America reached just 0.9% in the three-month period ending September, compared with 5.5% in the first three months of 2016.
Bloomberg said that although consumer spending was flat in August, it had had a strong quarter and would “provide a smaller but respectable contribution to economic growth this quarter, after the strongest quarterly advance since 2014”.
Clipped US consumption may, in part, be the result of the pending presidential elections, with Drewry noting that consumers usually “hunker down” in the run-up to these. However, it added, this may be exacerbated this election cycle due to reservations about both candidates.
“The signs are clearly there that Americans are no longer in a frame of mind to spend with the reckless abandon of the last two to three years, or, at the very least, they are only spending on things they absolutely need,” it continued. “Much of the pent-up demand after the great recession has been sated.”
September also saw an unprecedented 9.6% cut in slot supply on the Asia-ECNA trade – the largest single monthly cut for several years.
Again, Drewry said this did not take into account tonnage no longer available through Hanjin.
“It seems carriers reached the conclusion that a total monthly provision in excess of 500,000 teu was too much for this trade,” said Drewry, “and several adjustments were made in the third quarter to trim capacity as this year’s peak season has scarcely been emphatic.”
Among the services withdrawn were Ocean Three’s Manhattan Bridge loop and CMA CGM’s Vespucci Asia-USEC-North Europe pendulum service, which it shared with UASC and Hamburg Sud using 4,300 teu tonnage.
However, CMA CGM will retain its transatlantic segment as an end-to-end service, and the French carrier will be taking Asia-USEC slots on some CKYHE alliance products
However, the June opening of the Panama Canal extension resulted in a 12.2% surge for ports along the US east coast. The extension has seen shipping lines stop using the Suez Canal, with 14 out of 21 Asia-ECNA services now operating in Panama.
Having hung around the $1,600-$1,800 per 40ft mark between June and August, slot rates were given a much-needed GRI boost of $600 following Hanjin’s application for receivership in September. A second tranche of $600 was sought later that month, but failed to materialise.
Drewry noted that a further $1,000 GRI was called for 1 October.