Capacity squeeze sparks Asia-Europe rate revival

January 8, 2012, 7:12 pm 

Shippers are struggling to find space on containerships heading from Asia to the US and Europe, with cargo being left on the quayside and lines newly able to jack up their prices.

According to a report in IFW’s sister publication,Lloyd’s List, ocean carriers have managed to lift freight rates on the eastbound transpacific trades, reversing a slide that started in mid-2011 as a weak peak season fizzled out.

Spot headhaul transpacific rates rallied 27.6% in the past week, according to Drewry’s Hong Kong-Los Angeles container rate benchmark, rising from US$1,436 to $1,832 per feu.

The upturn began after action by Transpacific Stabilisation Agreement (TSA) members and removal of capacity for routine maintenance over Christmas. Similar conditions in the Asia-Europe trades has abruptly shifted the supply-demand balance.

Nearly all lines are now rolling cargo, according to analyst Drewry’s Philip Damas, a situation not seen since mid-2010. The squeeze on capacity reflects a mini-surge in shipments out of Asia ahead of factory closures during the Chinese new year holidays, when, traditionally, fewer ships are deployed.

TSA lines announced plans in November to individually raise all-in freight rates and charges by a minimum $400 per feu from1 January, as an interim step before publishing annual service contracting guidelines.

However, despite the latest increases, prices remain lower than they were a year ago. Current spot rates quoted by Drewry are almost 14% below those of 12 months ago, when they stood at more than $2,100 per feu.

- IFW

Rate war on Asia-Europe set to heat up

The Asia-Europe trade is set to get even more competitive as carriers prepare for capacity additions and an intensifying rate war.

According to analyst Alphaliner, competition on the trade will increase this year, as carriers restructure their networks and reshape their alliance partnerships.

"With all gloves off on the Asia-Europe trade in 2012, the rate war is expected to intensify - spelling disaster for all carriers on the trade," said the analyst.

At the end of 2011, the Grand Alliance (Hapag-Lloyd, NYK, OOCL) and New World Alliance carriers (APL, HMM, MOL) announced the creation of a "G6 Alliance", pooling their fleets on a consolidated Asia-Europe network. 

This move closely followed the announcement of the MSC-CMA CGM alliance on the same trade.

Alphaliner said that both initiatives were aimed at countering Maersk’s extensive coverage of the Far East-North Europe trade through its Daily Maersk service.

If Maersk intended to kill off competitors with comprehensive coverage of the route, it has not worked, said the analyst.

Additionally, the usual year-end surge in bookings did not materialise in 2011, forcing carriers to postpone the traditional peak-season surcharge on the Far East-North Europe trade.

According to Alphaliner, carriers will have one last chance to raise rates this month, prior to the lunar new year, which falls on 23 January. 

"However, with a weaker outlook for Chinese exports next year, any rate gains will likely be short-lived," it said.

"The much hoped-for rationalisation of Asia-Europe services is not bound to materialise, as the consolidation of services under the new partnerships fails to remove any excess capacity. And new tonnage will continue to flow from shipyards." - IFW