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November 12 2018

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30 The Journal of Commerce | November 12 2018 Asia-Europe Carriers and Ports Special Report terns. It's a weakness, nothing more. Asia-Europe is weak in sea freight." Soaring fuel prices, mega-ship orders, geopolitical tensions, and an unexpected decline in volume have constrained the fragile recovery of container shipping. Further, carriers can add the worldwide cap on sulfur content in bunker fuel set to take effect on Jan. 1, 2020, to the list of daunting challenges that lie ahead. Drewry's take on the low-sulfur cap: "The level of uncertainty today as to the total cost impact is so large that nobody is able to provide a con- fident forecast of the cost of compli- ance; the only certainty is that the extra cost will run into billions of dollars globally come 2020." IHS Markit's energy team predicts a "scramble period" of up to a few years when a new equilib- rium of supply and demand will be determined by refiners and ship- owners. This could result in the price of low-sulfur bunker fuel hovering around $680 per ton in 2020, up more than 30 percent versus the current price of high-sulfur bunker fuel grades, though other analysts have put the differential as high as 55 percent or higher. Carriers have little history of suc- cessfully passing along prior bunker fuel cost increases to customers, as the 2018 run-up in bunker prices has demonstrated. JOC email: twitter: @greg_knowler CEO of Kuehne + Nagel, who said some sources for Europe's consumer goods had shifted. "Some of the Asian economies have concentrated their market on Asia as well. So, we have strong double-digit growth on intra-Asia," he noted in Kuehne + Nagel's third-quarter earnings call with ana- lysts, transcribed by Seeking Alpha. "We benefit from the overall market development. On this trade (Asia-Europe) at the moment, we see this to be flattish. We watch this carefully. At the moment, no permanent change in the trade pat- of more than 200,000 TEU, and although Alphaliner said the vessels were being brought back into service, a Maersk Line spokesman said there was no announcement at this point. "Customer advisory still stands — the service will resume in-line with demand pickup, expected pre-Chinese New Year, which starts Feb. 5, 2019," he said. It is difficult for the capacity with- drawals to have the desired effect with large numbers of mega-ships floating into service. A total of 15 percent of ships currently in service and 60 percent of the order book are ships of 14,000 TEU and above that can only be deployed on Asia-Europe. However, while carriers have some flexibility in managing their supply, demand is completely out of their hands and it is in this area where a worrying trend is developing. According to the latest data from Container Trades Statistics, in the Jan- uary-August period — the September figures are not yet available — year- over-year decline. June was down 1.6 percent, and the peak-season months saw July volume falling 3.7 percent, and August, 2.4 percent compared to the same period in 2017. Uncertainty over the impact of escalating US-China trade tariffs on Europe clouds any longer-term out- look, even though much of the focus will be on trans-Pacific trade. This was touched on by Detlef Trefzger, -3.6% +3.8% +7.4% -4.3% +3.4% +3.9% +0.1% 9,000,000 9,200,000 9,400,000 9,600,000 9,800,000 10,000,000 10,200,000 10,400,000 10,600,000 10,800,000 Jan.- Aug.2011 Jan.- Aug.2012 Jan.- Aug.2013 Jan.- Aug.2014 Jan.- Aug.2015 Jan.- Aug.2016 Jan.- Aug.2017 Jan.- Aug.2018 Far East to Europe Growth in European imports from Asia slows to crawl Source: CTS © 2018 IHS Markit Total TEU volume of European imports from Asia with year-over-year change

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