Storm clouds darken on Asia-Europe box trade as carriers struggle with rates
The storm clouds on the major east-west container trades continued to darken this week as ...
Shippers exasperated by a reduction in container lines’ service quality and reliability suggested to delegates at this weeks TOC Container Supply Chain event in Singapore that carriers could benefit from providing more bespoke container services and concentrating the capacity management efforts on secondary trades.
John McCauley, vice president of transportation and logistics at Cargill, which books around 150,000 teu each year, said that while carriers’ focus had largely been on introducing ultra-large vessels on the main Asia-Europe and transpacific trades, his company saw far more growth on north-south and south-south routes.
“The result is that the capacity of suitable vessels that serve these trades does not meet demand,” he said.
“This means more volatility and leads to significant concerns about where carriers deploy capacity. Our supply chains rely on stability and the service levels of carriers is getting worse, which is unsatisfactory.”
However, he added: “There are innovations – HMM’s deployment of smaller vessels to run faster services on Asia-Europe and the transpacific; Matson’s expedited transpacific service; and APL’s Guaranteed GO service – all good signs that carriers are thinking about shippers’ requirements.”
Michael Nielsen, transportation operations manager for ASEAN and India at US manufacturer Caterpillar, suggested it could be possible for shippers to cooperate to induce carriers to offer bespoke services.
“Is there an option for a group of shippers to drive the creation of new corridors by putting our volumes together?” he asked.
“Obviously there would be no discussion of prices or rates, but could we consolidate volumes on particular niche trade to get a carrier to run to particular port calls?”
In response, Mr McCauley said shippers had to accept that often their own past history of volume forecasting worked against them.
“I think as shippers we have to put our hands up and admit that we have not been great at volume forecasts, and if you look at the statistics of container no-shows, particularly in Asia, it is really bad.
“But there are also opportunities in the right context, and if we think more immediately about who might support a certain market then carriers looking at deploying smaller vessels serving fewer ports on a bespoke service is certainly attractive,” he said.
He suggested carriers’ recent decisions to vastly increase vessel sizes on the Asia-east coast South America trade, reducing call frequency at the same time, “built up landside issues in Santos we were not used to”.
However, Tan Hua Joo, executive consultant at Alphaliner, warned shippers that the recent trend of deploying smaller vessels on deepsea east trades was unlikely to last.
“HMM’s services with smaller vessels is not about it wanting to provide a better service, it is the result of it not having partners on those trades. When HMM receives the new ULCV vessels it says it is going to order, you can bet it will drop the small ships.”
In the shake-up of services following Maersk’s takeover of Hamburg Süd, Mr Tan predicted that the Asia-South America trades would become a “major battleground for market share between carriers”.
“Carriers have not curbed their appetite for market share, which is most obvious when you look at the fleet expansion of Cosco this year. It is getting 320,000 teu in new ships and will likely have another 700,000 teu when it completes its acquisition of Cosco, with a further 60,000 teu of capacity chartered-in.
“Over the course of this year, it will become obvious that it is adding capacity and developing new services, especially in the north-south trades, which are not traditional markets for the Chinese.
“But Cosco’s new ULCVs will be deployed on Asia-Europe and they will then use other vessels to attack the traditional markets of the European carriers, such as South America.,” he said.