By Mike Wackett
After the humiliating failure to implement cumulative general rate increases in excess of $7,000 per TEU this year, carriers plying the Asia-North Europe tradelane are preparing to ask shippers to pay an average $1,000 per TEU extra from 1 September. But once again, the prospect that the container lines will manage to get even a percentage of this latest GRI to hold for longer than two weeks appears remote. Indeed, if the carriers cannot get rate increases to stick during a peak season, what chance do they have with the pre-holiday boom drawing to a close and seasonal weaker-demand months looming?
According to Alphaliner, after nine previous attempts to raise rates on the trade this year, shippers have become ‘more savvy’: they are holding back from bookings immediately after a GRI is imposed, on the basis that they can obtain lower rates when the rate hike falters. The consultant blames the Asia-Europe carriers for their inertia in terms of adjusting capacity to meet demand. It said that the refusal of the shipping lines to remove surplus capacity in June “effectively doomed” the July and August GRIs.
Alphaliner is particularly critical of the 2M grouping of Maersk Line and MSC for remaining “steadfast in not withdrawing any capacity” in July and August. The stubborn attitude of the 2M partners only softened last week when Maersk and MSC announced that their AE9/Condor service would be replaced by “a seasonal” string – subject to inducement – from mid-September. But Alphaliner suggests the 2M’s belated move to join the other three alliances in cutting capacity “comes too late to reverse the ongoing rate slide on the trade”, as vessel utilization levels remain stubbornly below 90 per cent.
The 2M’s decision to cull the AE9/Condor service reversed a June decision to downgrade the size of the vessels operating on the service from September from an average of 9,500 TEUs to 6,500 TEU types, with some even bigger ships, of 11,000 and 13,000 TEUs, being deployed in the interim. During Maersk Group’s second-quarter results presentation last week, Chief Executive Nils Andersen admitted Maersk Line had “overestimated market growth” on the tradelane and conceded that the carrier “needed to take the proper capacity decisions”.
It is not known whether 2M partner MSC was dragging its heels in agreeing to a capacity cut from Asia to North Europe, but it does highlight the downside of alliance membership as the Danish carrier cannot, as it did pre-2M, adjust its east-west schedule without the consent of the world’s second-biggest container line.
Meanwhile, Alphaliner data shows that total capacity between Asia and Europe increased by a year-on-year 5 per cent, as at August, with 62 new ships having been phased into the trade in the past 12 months. The newbuilds total 880,000 TEUs, with 81 ships equating to 675,000 slots having been cascaded down to other trades.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)