THE drastic capacity cuts in the containership industry, which have resulted in the size of the idle global containership fleet hitting a five-year high with one million TEU, has failed to tackle the problem of slumping freight rates.
In an effort to restore the balance between supply and demand shipping lines have been removing capacity on most of the main trade routes, with the Asia to Europe trade lane seeing the most drastic cuts.
Of the 21 strings operated by the four main carrier alliances in the Far East to North Europe trade, two have been removed by the 'Ocean 3' and 2M alliances. The G6 and CKYHE have removed nine and five sailings respectively in November and December, the Hellenic Shipping News reported quoting data from Alphaliner.
The drastic capacity cuts, however, have been insufficient to reverse the slump in freight rates. Spot rates from Shanghai to North Europe declined to US$409 per TEU last week according to the SCFI. Furthermore, shipping lines have not managed to retain most of the rate gains from the November 1 general rate increase (GRI), which ranged from $750 to $1,200 per TEU.
Despite cutting the number of weekly sailings by 3.8 strings in the fourth quarter, the capacity reduction on the Far East to North Europe route is only one per cent lower year on year.
The average size of ships deployed on this trade has risen from 12,000 TEU a year ago to 14,000 TEU at present. Last year, only one container line service offered a weekly capacity in excess of 17,000 TEU, now there are four such strings on the Asia to Europe trade lane.