The World Container Index, a measure of eight key east-west trade routes, has lost one-fifth of its value since August. The index is down US$309 per 40-foot container to $1,282 per FEU as of October 12. At the same time, freight rates on trades to West Africa, the Middle East and South America have shed half of their value.
During this period, the global idle containership fleet has expanded on the back of lower demand for larger ships, with 145 ships laid up as of early this month. That represents an increase from 355,000 TEU to 395,000 TEU, according to Alphaliner, reported TradeWinds of Oslo.
A rising number of vessel re-deliveries in the next two months is expected by Alphaliner to increase the number of idle ships again.
Normally, ocean liners would begin to remove capacity for the slack season towards the end of the year. This year, that does not look like happening, and that could present problems.
Denmark's SeaIntel Maritime Analysis estimates that in order to prevent overcapacity in the fourth quarter, some 25 sailings would have to be blanked or cancelled on the Asia-Europe trade, and 67 on the transpacific. On Asia-North Europe, that amounts to around one sailing per week.
According to the Freightos International Freight Index, rates are just clinging on on the China-US west coast and China-US east coast trades. It shows that on the China-USEC trade rates have plummeted from $3,500 per FEU in January to $2,000 per FEU.
Nord/LB estimates that 220 ships for a total capacity of 1.58 million TEU will be delivered in 2018. The majority of the larger vessels are to be deployed on the key Asia-to-Northern Europe lane, where maritime research consultancy Drewry expects capacity will be 20 per cent higher in January 2018 compared to the same month this year.
Drewry warns the massive influx of ultra large boxships slated for delivery in 2018 and 2019 means carriers might have to further rationalise services and cascade a number of 14,000-TEU units to smaller routes.
However, it is not all bad news. Drewry predicts spot rates on the Asia-to-Northern Europe lane to pick up again in 2018. It assumes that carriers, working in a smaller competitive pool, will exercise the same capacity management skills that have served them well this year to help offset the newbuilding deliveries.
Furthermore, volumes are continuing to grow on the world's largest trade between Asia and Northern Europe, which Drewry says could top the 10 million TEU mark for the first time ever by the end of December.