Asia-Europe supply and demand remains weak despite July freight rate hikes
ALTHOUGH freight rates shot up on July 1 for ships sailing from Asia to Northern Europe with full capacity, market fundamentals of supply and demand remained weak, making everything look artificially induced and unsustainable, according to Drewry Maritime Research.
Cargo from Asia to Northern Europe continued to grow in May, reaching 771,000 TEU, up 3.6 per cent on April. Much of this was only seasonal with the total for the first five months of the year down 2.4 per cent compared to the same period last year. This is not surprising, given that Europe remains in or close to recession, the researchers said.
Industry feedback indicates that this year's peak season between July and September will again be poor. Ocean carriers' response was to cut capacity by 4.6 per cent in May down to 804,732 TEU, primarily through cancelled sailings.
Altogether, 14 departures were suspended, compared to six in April, as ocean carriers battled to align supply and demand more closely in order to stop freight rates falling.
Only three sailings were cancelled in June, so vessel capacity increased 1.7 per cent to 818,705 TEU, and then rose 0.6 per cent in July to 820,101 TEU despite an extra sailing being omitted.
Meanwhile, ocean carriers continued to cascade vessels smaller than 10,000 TEU to other tradelanes and services to make room for bigger vessels.
Cargo from northern Europe to Asia remained in the doldrums in May, falling six per cent compared to April, down to 378,000 TEU. The consequence is that the average utilisation of all eastbound vessels sailing from northern Europe to Asia remained at around 65 per cent between February and May, which is a poor freight rate negotiating position.
This year's peak season is again unlikely to live up to expectations, so more vessel capacity will have to be withdrawn from August onwards, most likely via further vessel cancellations, the research said.
ALTHOUGH freight rates shot up on July 1 for ships sailing from Asia to Northern Europe with full capacity, market fundamentals of supply and demand remained weak, making everything look artificially induced and unsustainable, according to Drewry Maritime Research.
Cargo from Asia to Northern Europe continued to grow in May, reaching 771,000 TEU, up 3.6 per cent on April. Much of this was only seasonal with the total for the first five months of the year down 2.4 per cent compared to the same period last year. This is not surprising, given that Europe remains in or close to recession, the researchers said.
Industry feedback indicates that this year's peak season between July and September will again be poor. Ocean carriers' response was to cut capacity by 4.6 per cent in May down to 804,732 TEU, primarily through cancelled sailings.
Altogether, 14 departures were suspended, compared to six in April, as ocean carriers battled to align supply and demand more closely in order to stop freight rates falling.
Only three sailings were cancelled in June, so vessel capacity increased 1.7 per cent to 818,705 TEU, and then rose 0.6 per cent in July to 820,101 TEU despite an extra sailing being omitted.
Meanwhile, ocean carriers continued to cascade vessels smaller than 10,000 TEU to other tradelanes and services to make room for bigger vessels.
Cargo from northern Europe to Asia remained in the doldrums in May, falling six per cent compared to April, down to 378,000 TEU. The consequence is that the average utilisation of all eastbound vessels sailing from northern Europe to Asia remained at around 65 per cent between February and May, which is a poor freight rate negotiating position.
This year's peak season is again unlikely to live up to expectations, so more vessel capacity will have to be withdrawn from August onwards, most likely via further vessel cancellations, the research said.