News / Alliances differ on post-CNY plans for east-west box trade capacity

Photo: VesselFinder

As the liner shipping industry awakes after the usual Chinese New Year volume hibernation, there appears to be a clear difference emerging on how different carriers are deploying capacity on the transpacific and Asia-Europe trades.

Conflict in the Persian Gulf notwithstanding, the post-CNY demand-supply balance appears to remain on a knife edge, with carriers’ capacity management over the past fortnight – on the transpacific trade, for example – held  responsible for averting a dramatic collapse in spot rates.

“Contrary to historical trends, where carriers slash prices post-holiday to capture first volumes, the market has seen a surprising lack of aggressive price-cutting,” said US west coast forwarder Freight Right last week.

However, it added: “The next two to three weeks are critical, as the first ‘true’ post-holiday orders begin to hit the water. Current indicators suggest rates will remain flat through late March.

“However, carriers are expected to keep a close eye on these volumes to inform their strategy for the April and May contract negotiations.

“If demand remains tepid, shippers should expect carriers to introduce more aggressive capacity management, such as blank sailings, in an effort to artificially tighten the market, and bolster their bargaining power for long-term agreements,” it said.

Much will therefore depend on how much capacity carriers insert into their networks in the coming weeks and, according to new analysis by Sea Intelligence of the alliances’ pro forma schedules to mid-May, there is  considerable divergence – especially between Gemini’s forward offering and that of the Ocean Alliance.

Over the next 10 weeks, the Ocean Alliance will see its Asia-North America west coast weekly capacity increase from 105,000 teu to 128,000 teu; while its Asia-North Europe capacity will rise from 128,000 teu a week to 138,000 teu, showing “how aggressively the Ocean Alliance is moving to capture an anticipated spring market expansion”, noted Sea Intelligence.

“This recent surge in capacity is not driven by any structural change or upgrade to their underlying services; rather, it is the direct result of a fully deployed baseline network,” it added.

In contrast, the Gemini partners’ transpacific capacity to the North American west coast will rise incrementally, from 44,400 teu a week to 45,000 teu; while its Asia-North Europe capacity will grow from 73,600 teu to 83,500 teu a week.

Source: Sea-Intelligence Consulting

This means Gemini’s market share of both trades, measured by capacity, will drop to 13% on the transpacific, from 15% currently, and on Asia-North Europe to 23%, from 27%, simply as a result of competitors’ fleet expansion.

Source: Sea-Intelligence Consulting

However, the analyst also warned that the Ocean Alliance’s capacity strategy would also likely be accompanied by high weekly variations, as it would likely be forced to blank some sailings during periods of weak demand.

“Ocean Alliance’s fluctuating deployment pattern indicates a highly elastic network architecture; the alliance is actively scaling its weekly physical supply up and down to absorb the expanding market volume.

“While this maximises their market share footprint, it inherently injects significant variance into their week-to-week available capacity,” it said, noting that Gemini’s strategy is almost the polar opposite.

“Gemini Cooperation, by contrast, displays an exceptionally low volatility profile across the observed period – their deployed capacity remains nearly static week over week, regardless of the broader market’s expansion.

“This rigid deployment pattern points to a highly synchronised, closed-loop network that does not structurally flex to capture sudden market surges,” it explained.