Wednesday, June 24, 2015

CONTAINER LINES, MORE SERVICE DETERIORATION

And more problems for supply chains!!!

Shippers warned: more service cuts will come as carriers struggle to curb losses

By Mike Wackett
06.24.2015 · Posted in Loadstar posts, Sea FavoriteLoadingAdd to favorites
ZIM Antwerp in Hamburg, May 2011
With global container spot freight rates in freefall and contract rates being discounted by ocean carriers just to hold onto business, Drewry Supply China Advisors said yesterday there was an increasing risk to shippers that entire service strings could be removed with little or no warning as container lines attempt to stem mounting losses.
Carriers on the Asia-Europe trade have so far used ad-hoc voyage cancellations in a bid to rebalance capacity and support general rate increases, but as this has proved increasingly ineffective, some analysts have now suggested that alliances may have little option other than to temporarily idle ships.
In its Container Freight Trends & Outlook webinar yesterday, Drewry’s head of research products, Martin Dixon, and senior consultant Stijn Rubens left participants in little doubt of the seriousness of the situation and said shippers should closely monitor the financial position of carriers.
Mr Rubens emphasised the parlous position of Asia-North Europe carriers. Spot rates have plummeted to less than $200 per teu from a high of over $1,200 in January.
Weak demand has caught carriers off guard, falling 8% below 2014 levels in recent months, while the trade has continued to receive new ultra-large container vessels (ULCVs) from shipyards. This toxic combination has resulted in general rate increases being ignored as lines grabbed cargo at any price, explained Mr Rubens.
The problem is exacerbated by the flood of newbuilds in the 13,000-19,000 teu range, he added, which will average one a week for the remainder of the year. Even more daunting is the prospect of another 46 scheduled for delivery in 2016.
Moreover, the peak season, when carriers on the route traditionally make most of their money, is now predicted to be “muted” this year, which will pile on more pressure in the weeks to come.
Drewry added that the situation on the trade from Asia to the US was not much better.
Again, GRIs have been largely ignored, with the added factor of a temporary shift of cargo away from the US west coast, tempting carriers to deploy too much capacity to east coast ports, triggering a new round of rate erosion.
Meanwhile, on the Pacific coast, the cascading of larger vessels onto the trade has also had a negative effect on freight rates, which says Drewry has resulted in the “first cracks” in the ocean carriers’ strategy of constantly upsizing ships.
Elsewhere, north-south trades have been affected by what is happening on east–west routes and Drewry’s indices are all trending downwards, offering little chance of higher returns for beleaguered carriers.
Indeed, even the most optimistic of carriers will struggle to find any positives in Drewry’s latest freight rate analysis, and the outlook appears equally grim, according to Mr Dixon. He said Drewry did not expect the key Asia-Europe trades to return to equilibrium “in the foreseeable future”.

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