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September 2 2019

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36 The Journal of Commerce | September 2 2019 European Shipping: Midyear Review and Outlook Special Report SPOT CONTAINER FREIGHT rates on the Asia-North Europe trade have been at loss-making levels for much of the year, and with surplus capacity keeping downward pressure on prices, increasing volume only has only extended those losses, according to BIMCO's chief shipping analyst. Container volume transported from Asia to Europe in the first half of 2019 rose 5.9 percent compared with the same 2018 period, accord- ing to data from Container Trades Statistics (CTS). BIMCO's Peter Sand said the increase in volume was surprising given slowing economies in Europe, but he noted the volume was moving at low rate levels. "Volume growth has been very strong, but Shanghai Containerized Freight Index (SCFI) spot rates from Shanghai to Europe have been loss-making (for carriers) most of the year, especially since March," he told The Journal of Commerce. The China Containerized Freight Index (CCFI), which Sand said is a better indicator of the over- all market because it covers both spot and contract rates, was down 1.3 percent year over year in the first half. "If rates are loss-making, higher volume only brings around larger losses," he said. According to the SCFI, Asia- North Europe spot rates were down 14.6 percent year over year in the week ending Aug. 9. Out of options Mega-ships coming on line — 10 vessels of 20,000-plus TEU capacity and another seven ships of 15,000 to 20,000 TEU have sailed into Asia- Europe service this year — are pres- suring rates and leaving carriers with little option but to cancel sailings. Lars Jensen, head of consulting at Rotterdam-based Sea-Intelli- gence, said with the widespread weakness in demand growth, carriers would not be able to manage capacity by cascading large vessels to other trades. "And as new vessels continue to be delivered, shippers need to prepare themselves for the only effective tool left in the carri- ers' toolbox — more blank sailings and service rationalization," he warned in a LinkedIn post. The OCEAN and THE vessel-shar- ing alliances already have announced the removal of more than 150,000 TEU from the Asia-Europe trade via voyage cancellations through July and August. Citing "fluctations in demand, the OCEAN Alliance in early August said it would withdraw another two sailings on the Asia- North Europe trade, extending its capacity cuts into September. The rate erosion caused by surplus capacity was visible in the first quar- ter results of Ocean Network Express (ONE). On the westbound Asia- Europe trade, the carrier reported that rates hovered around the same low levels as 2018, as capacity out- stripped strong overall demand. ONE carried 460,000 TEU on the trade Caught in the undertow Low Asia-Europe container rates are undermining volume gains By Greg Knowler

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