At the current pace of capacity increases by major ocean carrier alliances, at least two services between Asia and Europe may need to be terminated to compensate for recent rate hikes, according to a new analysis from maritime consultant SeaIntel.
The newly-built ultra large container vessel (ULCV) Madrid Maersk is 2,000 TEUs smaller than the nine new CMA CGM ULCV on the orderbooks.
Excess capacity may force container carriers to shutter or skip sailings on at least two loops between Asia and Europe in the fourth quarter of 2017, according to a new analysis from maritime consultant SeaIntel, as reported by industry news outlet The Loadstar.
According to SeaIntel, a capacity increase of 11.5 percent by the three east-west alliances between the second half of 2017 and the first half of 2018 will result in a weekly excess of roughly 28,300 slots between October and December this year, potentially starting a “rate war.”
The SeaIntel report states that the 2M Alliance will increase its deployed capacity on the route by 3.2 percent and THE Alliance by 11.9 percent, but the Ocean Alliance could see a capacity increase of as much as 24.6 percent.
The phasing-in of new ultra-large container vessels (ULCV) will require “more judicious capacity management by ocean carriers,” as a probable imbalance will require “the de-facto closure of a weekly service by each of the three alliance,” said SeaIntel.
One alternative posed by SeaIntel is to “cascade the displaced Asia-Europe vessels into other tradelanes,” although smaller markets would then have rate issues.
“This would lead to an even greater need to reduce the number of services in such trades, as they would be shorter and smaller than Asia-Europe,” added SeaIntel CEO Alan Murphy.
Another strategy, adopted by Maersk Line, is to off-hire excess charter tonnage. Maersk Line charters in 51 percent of its capacity, whereas MSC charts in 65 percent and CMA CGM around 63 percent of its tonnage, said SeaIntel.
The Loadstar noted that the Ocean Alliance members, as well as CMA CGM after putting in an order for nine 22,000-TEU vessels, might use the argument that they will be returning chartered ships to their owners when the new ULCVs are delivered.
Shipowners will suffer from potentially fewer charters, but if chartered vessels are “fixed on their suitability for specific trade,” writes The Loadstar, then “cascading bigger ships to replace them will not always be workable.”