Asia – Europe: The outlook for shippers in quarter 4

As sea freight rates soar on the Asia-US trade, the question is, will the lines try and repeat their revenue recovery on the Asia – UK trade.

A headline in a recent trade journal predicted they would. “The container shipping lines have got the bit back between their teeth and are about to squeeze shippers until the pips squeak!”

The first half of 2018 has been, to put it mildly, disappointing for the shipping lines, as volumes from Asia to North Europe failed to keep up with other booming markets but, as the peak season loomed, signs suggested that things may be moving in the lines favour, as they began to reduce capacity ahead of the Asia peak season.

Reports from the trade press in recent weeks confirmed that the lines are eager to make back their losses from earlier in the year by squeezing shippers, as their volume cuts begin to bite.Screen Shot 2018-08-28 at 13.12.36

As stated earlier, space has been particularly tight on the Asia – US trade, driven by excessive demand ahead of the administration’s tariffs, which means the carriers have been able to drive rates to levels, 50% higher than 2017 and demand is still increasing, with rates likely to follow.

The initial signs were that the Asia- Europe trade was not far behind, driving concerns that the lines would be equally ruthless, by slashing more capacity and driving rates up further.

The raft of blanked sailings announced ahead of Golden Week suggested that the Asia- Europe trade was not far behind, driving concerns that the lines would be equally ruthless, by slashing more capacity and driving rates up further.

And now Maersk and MSC are withdrawing a further 11 ultra-large container vessels (ULCV) from the end of September, which could see 200,000 teu withdrawn until next February, which should tip the scales firmly towards the carriers.

In potential good news for shipper, this week’s Lloyds Loading List reports that the analyst Drewry believe the cancellations are not expected to raise freight rates. Provided other carriers don’t follow their lead in cutting volumes further.

Drewy’s opinion is that there is nothing to suggest that is a likely course of action.

If there are cuts, the most obvious source would be the Ocean Alliance, which will now take over as the largest capacity provider in the Asia-North Europe trade.

But. Will be they willing to forego the market share they can now scoop up in Maersk absence?