News / Carrier crisis as ships idle while Asia-Europe sees lowest-ever freight rate

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Capacity between Asia and North Europe is still way ahead of demand, even after blanked sailings, noted the latest Alphaliner report, while sea freight rates on the trade have sunk to a new low.

Capacity is on the lane is averaging out at around 250,000 teu per week, compared with an estimated demand of only 200,000 to 225,000 teu, making the proposed 1 May general rate increases by carriers of up to $1,300 per teu already appear to be a lost cause.

The consultancy revealed that despite the withdrawal of five sailings over the previous two weeks, average utilisation levels have stubbornly refused to budge from the 80% to 90% range, thereby exerting more downward pressure on spot rates.

Against this weak demand backdrop, the Shanghai Containerized Freight Index (SCFI) reading for Asia – North Europe plunged to another low of $399 per teu on 17 April, but Alphaliner reported that the ‘market’ has already fallen to sub-$300 levels – the lowest freight rate ever recorded on the trade lane.

As first reported by The Loadstar on 10 April, the looming excess capacity crisis obliged MSC, as part of the 2M alliance with Maersk Line, to postpone the maiden voyage of its flagship 19,224 teu MSC Oliver – the vessel having been idled in China for more than three weeks to await cargo.

Carriers are panicking: today CMA CGM, as part of the Ocean Three alliance, confirmed details of a “contingency plan” whereby between weeks 16 and 20 the Ocean Three members will cancel six Asia – North Europe voyages “in order to adjust capacities in line with demand”.

The drastic culling of sailings is necessary. Spot rates have actually fallen to less than $100 per teu, said Alphaliner, after deducting the bunker surcharge – and could even turn negative soon.

The consultancy estimated that the enforced idling of the MSC Oliver will have cost the carrier around $1.5m in vessel fees alone, without taking into account the loss of freight.

But despite the high short-term cost, the carriers have no option but to continue the strategy of blanking sailings – other than to take the unpalatable step of laying up ships – until the market improves; and that will probably not be until the peak season begins in July.

Meanwhile, the Asia – Europe supply chain is being thrown into chaos by the blanked sailings. Shippers have complained to The Loadstar that they receive little or no information from carriers on what ship will actually be loading their cargo and, more importantly, when their containers will arrive at North European ports.

And European export shippers are worried that in the brutal endeavour by carriers to get the headhaul supply and demand balanced that, as in past years, their cargoes will be sacrificed and rolled over from cancelled ship to cancelled ship.

In the days of the conferences it was the responsibility of the ‘lead line’ to announce scheduling changes to the trade, although these were not normally quite as dramatic as cancelling a ship, but were generally down to bad weather or strike delays. But in the new world of vessel sharing agreement alliances it is a much more confused picture.

The notifications regarding cancelled sailings seen by The Loadstar seem to range from comprehensive, to confused, with certain carriers opting to keep quiet in order to try to distance themselves from their peers.