News / Blanked sailings soar as carriers anticipate CNY slump

Photo: VesselFinder

The transpacific, transatlantic, and Asia-Europe trades are all set for a surge in blanked sailings as China’s new year celebrations get under way.

The two-week holiday, which begins today and brings most shipping and logistics operations in the country to a halt, has led carriers to blank a wave of sailings for the rest of the month, anticipating a sharp contraction of volumes.

According to Drewry’s Container Forecaster, 136 scheduled sailings have been cancelled for February across the transpacific, Asia-Europe and transatlantic trades, 122% more than in January, when initially strong demand fizzled out sooner than most expected; but carriers largely maintained capacity despite declining spot rates.

“Carriers are clearly leaning heavily on the blank sailings, at least partly to adjust to the seasonal drop in cargo during the lunar new year holidays,” Drewry said.

“Most of the blank sailings are on the transpacific route,” it added.

“Our view that the ramp-up in blank sailings is at least partly caused by Chinese New Year is reinforced by the fact that blank sailings will fall back in March.”

Source: Drewry

So far, just 53 blank sailings have been announced for March, which Drewry explained would mean an “effective capacity increase of 20%”, although it added the demand outlook continued to soften, with Q1 26 volumes forecast to drop from the previous quarter, and follow 8% and 5% volume declines at Los Angeles and Long Beach, respectively, in December.

And a further worrying sign for carriers is the already declining asset utilisation.

“Transpacific-eastbound ship utilisation was already below 85% before we entered the weak first quarter,” it said.

While carriers will be most focused on filling ships as much as possible in March, hoping for a repeat of last year’s early peak season once CNY ends, the longer-term supply outlook remains challenging, with structural overcapacity expected to spike, at nearly 10% in 2027, and could last until the end of 2028, according to new calculations by analysts at Sea-Intelligence Consulting.

The global newbuild orderbook now stands at 34% of the size of the existing fleet, a level last seen just before the financial crisis, and with a muted demand forecast, the gap between supply and demand is expected to widen up to 2028, at least in structural terms.

Source: Sea-Intelligence

Four key variables remain, however, that can mitigate the overcapacity, the consultancy noted – long-term slow-steaming; port congestion; the Red Sea crisis; and scrapping.

Baked into its analysis are the following assumptions: that carriers will routinely slow-steam to use more vessels, as was learned post-financial crisis; that port congestion will effectively “occupy” 6% of the global fleet; that the Red Sea crisis will end around mid-2026 with Suez transits resuming and thus returning around 10% capacity to the fleet; and finally, that the 65% of the global fleet that is currently aged over 20 years will be scrapped by 2029.

With these four elements factored-in, Sea-Intelligence argued that industry-wide overcapacity would grow over the course of this year as these factors begin to weigh, leading to a peak next year which carriers will find more challenging to manage than the post-pandemic slump of 2023.

Source: Sea-Intelligence

“The magnitude of the overcapacity is almost the same as seen in 2016, which is a year best remembered for the apex of a strong price war between the carriers,” writes Sea-Intelligence, neglecting to note that the freight rate war that year ultimately led to the bankruptcy of Hanjin.

“It can also be seen that the projected overcapacity is nowhere near as bad as in the financial crisis back in 2009,” it added. “But it is worse than what we saw in 2023, prior to the advent of the Red Sea crisis – and will persist for two years,” it said.