Several top container lines are to drop some sailings in the Asia to Europe trades over the coming weeks during what should be the busiest time of year.In what appears to be an unprecedented move, Cosco Container Lines, Yang Ming and Hanjin Shipping have said they will reduce capacity during the forthcoming peak season.
The move coincides with further efforts by some lines to push freight rates up again, either through general rate increases or peak season levies. The latest operator to advise customers of a peak season surcharge is Mediterranean Shipping Co, which plans to impose a $350 per teu levy on cargo moving from Asia to northern Europe and the Mediterranean from August 1. MSC had originally intended imposing a $350 per teu seasonal surcharge on June 1, but then delayed that move because of market conditions.
Hapag-Lloyd, which has been leading the rate restoration effort, has already announced plans for a peak season surcharge of $350 per teu to run from August 1 to September 30, plus another general rate increase of $250 per teu to start on August 15.
Yet at the same time, some members of the CKYH alliance are planning to blank sailings from late July to mid-August, an indication that forward bookings are not looking strong.
The four member lines all share space on each other’s ships, so the missed voyages affect the whole consortium. Evergreen also co-operates with the alliance, although is not a member.
In week 30 and 33, the NE4 loop operated by Yang Ming in partnership with K Line will drop its weekly departures. In week 31, one sailing will be skipped, while another will be operated with 5,600 teu vessel rather than one of 8,600 teu.
Latest data from Container Trades Statistics reveals weak trade developments, with volumes from Asia to Europe down by 6.9% in May, compared with the corresponding month a year earlier, to just over 1.1m teu. Shipments to the western Mediterranean were particularly hard hit. The May decline followed a 3.2% drop in April and flat numbers for the first quarter. In 2011, Asia-Europe volumes rose by a modest 4.5%.
The World Container Index shows that Asia to Europe freight rates have lost some ground over the past week although they are still triple values at the start of the year.
The Shanghai-Rotterdam component dipped $32 per feu to $3,489, having gained around $400 a week earlier when July 1 rate increases kicked in. Shanghai to Genoa rates have lost $71 during the past seven days.
Maersk skips Asia-Europe sailings as peak season disappoints
The Danish carrier is one of a number of leading operators to have either cancelled some sailings or deployed smaller ships at a time of year when volumes would normally be very strong.
But despite a disappointing peak season so far, some lines are telling their customers to expect further rate hikes in September and October as the industry strives to return the Asia-Europe trades to profit.
“I would not rule that out. We will try to maintain the momentum,” said one trade director, speaking on a background basis. “Lines should not be afraid, they should go for it, we need the money in order to sustain our services.”
The message to shippers from some leading carriers is to ignore utilisation as an indicator of future price adjustments. They hope that the success of lines in obtaining hefty rate increases in March, when ships were not full, can be repeated, and that load factors should not determine the success or failure of rate restoration programmes.
Confirmation that Maersk Line is making some capacity adjustments follows similar action by members of the CKYH alliance that have also blanked a number of sailings.
Maersk said it had made some schedule changes over the past month. Whether supply is trimmed further over the next few weeks will depending on demand, Maersk told Lloyd’s List.
But although there is broad consensus that the seasonal surge in cargo has yet to happen, shippers still face another round of rate increases.
Maersk, for example, plans to levy an increase of $250 per teu on August 1 for cargo moving from Asia to both northern Europe and the Mediterranean. United Arab Shipping Co has advised shippers of a planned $325 per teu peak season surcharge on August 1.
Hapag-Lloyd, the line that started the rate recovery effort in March with a $750 per teu increase, now plans to impose a peak season surcharge of $350 per teu to run from August 1 to September 30, plus another general rate increase of $250 per teu to start on August 15.
These upwards adjustments will not be a net addition to announced rate increases over the past few months, though, with efforts in June and July only partially successful and some planned peak season surcharges delayed. Hapag-Lloyd, for example, had originally intended to apply a PSS on Asia to Europe cargo on July 1. Mediterranean Shipping Co also postponed introduction of a peak season levy for a few weeks because of flat demand.
The China-Europe component of the Shanghai Containerised Freight Index slipped $81 per teu, or 4.4%, last week to $1,747, having gained more than $300 when the latest rate increases took effect at the start of the month.
Despite steep freight rate increases in the Asia-Europe trades since late last year, when a price war debilitated the market, leading lines say the round-trip voyage is still unprofitable.
Overall the industry is not making any money on Asia-Europe services, said one executive,
Even if August rate increases are achieved, the trade would not be much above breakeven, according to some estimates. While several lines were prepared to make some rate concessions in June and July as the peak season failed to get under way, others are already looking ahead to price increases in the coming months, regardless of demand conditions.
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