News / Carriers juggling capacity and port congestion 'taking us back to the dark days'

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Shipping’s response to the Red Sea crisis is to reduce capacity to an extent far exceeding expectations, leading to a situation in Europe for Asia-Mediterranean traffic not seen since the pandemic, according to some analysts.

According to Xeneta, new transhipment networks, meant to reduce the impact of Red Sea diversions, are instead adding to it by creating congestion. Deploying more smaller vessels has contributed to an increase in wait times.

The Loadstar recently reported that carrier giants such as Cosco and Evergreen were redeploying tonnage purpose-built for the Far East-North Europe trades to the Mediterranean in the hope of stemming under-capacity there.

“If we focus on the first 14 weeks of 2024, capacity on Asia-Med is up by 8% year on year already, whereas it’s down 3.1% on Asia-North Europe,” Xeneta’s Peter Sand told The Loadstar recently.

“West Med transhipment ports are as busy as ever, and may already be exceeding peak productivity levels,” he continued. “The port of Barcelona handled 48% more transhipment teu in Q1 24 than last year. According to Xeneta data, we can clearly see the attractiveness of this trade, from a carrier perspective.”

The additional attention is having a knock-on effect on wait times, which at Barcelona have increased to 3.53 days. According to Xeneta’s short-term market averages, rates from Singapore to Barcelona were climbing again, from a lull in March, up 10% at the beginning of this month, close to levels last seen at the outset of Red Sea diversions in January.

A customer note from a UK forwarder last week gave a dire indictment of the current scenario. It said: “With demand higher than forecasted, there is a realisation we have entered an extremely challenging period, not seen since the dark days of the pandemic. We anticipate this is likely to continue into Q3, where there may be some respite from new capacity coming into the market.”

Mr Sand told The Loadstar this morning: “I would not go as far as saying [capacity] is insufficient. If there was insufficient capacity, you would have seen spot rates continuously climbing, which hasn’t been the case.

“But carriers are in a comfortable position right now, taking advantage of it too as they have pushed successfully for higher rates from early May, and another round will follow in a few days.”

Hans-Henrik Nielsen, global development director at CargoGulf, suggested last week that while much additional capacity may have come online since the 2021-22 vessel-ordering spree, it was of the wrong sort.

“There is no doubt many of the 24,000 teu vessels are only suitable for one specific trade, Asia-Europe. It is clear that they are not very flexible in deployment to other trades.”

Mr Nielsen also pointed out that there had been, what he described as, a “de-facto non increase in capacity”, thanks to the re-definition of slow-steaming, which reduced from an average 17.3 knots in 2010 to 13.9 knots last year.

Lars Jensen, CEO of Vespucci Maritime, commented: “When the Red Sea crisis first unfolded, there were many different analysts who basically came to the same conclusion – that the amount of overcapacity roughly matches the need for capacity to go around Africa, but there would be zero slack left in system to handle any other disruptions.

“In recent months, port congestion has been gradually worsening, due in part to ripples from new transhipment patterns, in part due to vessels arriving off-schedule and in part due to bad weather. As we saw very clearly during the pandemic, port congestion leads to a de-facto reduction of available vessel capacity.”