News / No takers, so more unemployed big box ships will join the idle fleet

© Eq Roy

Ocean carrier loop suspensions will add significant tonnage to the idle fleet, unless the redundant vessels are redeployed or chartered-out – but these options seem unlikely in the current market.

Last week, THE Alliance partners Hapag-Lloyd, ONE, Yang Ming and HMM announced the suspension of the FE5 Asia-North Europe loop and the EC4 Asia-US east coast service this month “until further notice in consideration of the present market situation”.

The two loops deploy 22 vessels of between 13,000 teu and 14,000 teu, raising the question of what the alliance members will do with their surplus ships.

“It is fair to assume that some of them will be idled until the market situation improves, or be redeployed in the carriers’ networks,” said Alphaliner.

The consultant suggested the ships could be offered on the charter market in order to garner some much needed revenue. However, the THEA carriers would not want to commit to long-term charters in case there was a bounce-back in demand and need to reinstate the suspended services.

Moreover, the only potential charterers of these big ships would be other top-ten carriers that are all experiencing the same issues of oversupply of capacity across their tradelanes.

Alphaliner’s idle fleet survey, in its latest report on 23 October, recorded an increase of inactive capacity of 111,867 teu, for a new total of 1,287,406 teu, representing 5% of the global fleet.

Arguably, the idle fleet total has been kept artificially low by the strategy of carriers to soak up surplus tonnage by a combination of blank sailings, super-slow steaming and sliding advertised sailings into following weeks.

But the lines are now beginning to realise that their capacity management tools need to be upgraded to temporary east-west service suspensions; not least in order to change the supply/demand dynamics, which currently give shippers plenty of choices and the power to demand low rates, thus forcing rates back up above breakeven.

Indeed, in forecasting an operating loss of $191m for the second half of its fiscal year, Japanese carrier ONE said yesterday it was addressing the situation with a number of structural changes to its network.

The carrier said following the autumn holidays in Asia, the recovery in booking demand on the Asia-Europe and transpacific tradelanes had been slower than anticipated. CEO Jeremy Nixon said consumer demand was “subdued, and customer inventory levels are generally rebalancing to more conservative levels”.

He added: “In response to generally weaker export demand in Asia for North America and Europe, ONE and its THEA consortium partners are now making a number of structural network deployment changes,” said Mr Nixon. He said that the changes were “intended to reduce the need for ad-hoc sailing withdrawals and to overall improve on-time vessel schedule reliability”.

Interest will now be focused on the Q3 earnings calls of Maersk, on Friday, and Hapag-Lloyd, next Thursday, and to learn how the second- and fifth-ranked carriers are managing the downturn.