News / THE Alliance suspends transpacific service, but more capacity cuts needed

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THE Alliance is suspending a transpacific loop in a move suggesting that carriers are now prepared to take more radical action on capacity management in order to balance supply with falling demand.

THEA members Hapag-Lloyd, ONE, Yang Ming and HMM advised today that they are suspending their PN3 loop from Asia to the North American west coast, “until further notice”, effective the first week in October, “in consideration of the present market situation”.

According to eeSea data the PN3 weekly service deploys ships with an average capacity of 11,400 teu on a 49-day round trip voyage.

In order to mitigate the impact of the temporary suspension of the PN3 loop, THEA said it would add port calls and make a rotation change to its Asia-North America PN2 service.

The network change on the transpacific tradelane follows the extensive blankings announced by THEA members on Asia-North Europe and Asia-Mediterranean services around the Chinese Golden Week holiday.

Indeed, the 2M, Ocean and THEA partners have all significantly ramped up their blanking programmes in the past few weeks taking out capacity on both the transpacific and Asia-Europe trades through to the end of next month in an attempt to halt the slide in spot rates.

Analyst Sea-Intelligence noted that there had been a “massive reduction in scheduled capacity” which it attributed to “a large number of last-minute blank sailings”.

Notwithstanding the element of ‘last-minute’ cancellations, some loops from Asia have been blanked for a number of consecutive weeks which could be interpreted as a de-facto service suspension.

However, for commercial reasons alliance member lines have been reluctant to agree to temporarily suspend services, particularly if the specific loop is the preferred choice of its blue-chip customers.

Moreover, compared to continuous blankings and slidings the suspension of a service, albeit stated to be “temporary” has negative connotations for the respective alliances and member lines.

It follows that none of the three vessel sharing alliances wants to be “the first to blink” in taking tough decisions on suspending services.

But with container spot rates, particularly between Asia and Europe, in freefall in the past few weeks the long-term sustainability of services is being questioned against a backcloth of plummeting demand and a chronic oversupply of tonnage.

Some 24,000 teu newbuild deliveries that should have been phased into Asia-North Europe loops have come straight from the shipyard to be idled at anchor and there is worse to come.

According to Alphaliner data there is a further 2m teu of new tonnage due to hit the water by the end of the year.

“The uninterrupted injection of large newbuilding tonnage is making things worse, forcing carriers to cut capacity more aggressively than usual in an effort to stem the continued freight rate erosion,” said the consultant.

“Demolition meanwhile is still low, while oil prices continue to rise rapidly, which is doing little to help,” said Alphaliner.

It is clear therefore that the blanking tool, used very effectively previously and in particular during the Covid lockdowns of 2020, are no longer fit for purpose and that the liner industry will need to ‘bite the bullet’ and make more service suspensions in order to overcome the current crisis.