THE truce between carriers on the Far East-Europe trade that replaced last year's war of attrition could soon be coming to an end with cracks beginning to show in the carriers' united front with additional capacity coming on stream despite the lack of clear signs of a strong volume recovery, according to Alphaliner.
Last week, two carrier groups sent conflicting signals on the state of the market.
Zim said in a statement at the beginning of the month that there are positive developments in the market to justify the relaunch of its joint AEX2/CES2 service with Evergreen and CSCL. However, the G6 group came out a day later to state that there have not been any improvements in the current market environment to justify adding more capacity.
Carriers are under pressure to deploy their new vessels of above 10,000 TEU, most of which are aimed at the Far East-Europe trade. A total of 26 new ships of this size have already been delivered during the first four months of this year, with 29 more new units due in the next eight months. Besides, two idled 10,000-TEU ships are also to be reactivated.
Far East-Europe freight rates appear to have peaked after four rounds of rate increases since late December last year, which raised westbound spot rates from US$490 per TEU to $1,934 per TEU. Forward rates traded on the Shanghai Shipping Exchange dipped last week as signs of rate under-cutting emerged. Forward rates for July fell from $2,027 per TEU to $1,770 per TEU in the last two weeks, before news of further rate increases and peak season surcharges in June propelled it back up to $1,872 per TEU recently. However, carriers will face a much harder battle to maintain the momentum for further rate increases in the face of rising capacity supply.
The G6's announcement that the group will not launch a seventh FE-North Europe string on the trade will curb some of the expected capacity increases. Weekly capacity on this trade is forecast to be 11 per cent lower than 12 months ago, with only 25 weekly services expected in June compared to 31 strings in the same period last year.
However, the launch of two new strings in April and May and the upgrade of several existing strings by the G6 and CKYH will still add about eight per cent to the total trade capacity, compared to the March figure this year. Any further capacity increases will likely tilt the demand/supply balance against the carriers' favour as demand growth is expected to be flat or mildly negative in the next three months.
WORLD SHIPPING
11 May 2012 - 00:01
Tenuous FE-Europe carrier truce undermined by rising overcapacity
THE truce between carriers on the Far East-Europe trade that replaced last year's war of attrition could soon be coming to an end with cracks beginning to show in the carriers' united front with additional capacity coming on stream despite the lack of clear signs of a strong volume recovery, according to Alphaliner.
WORLD SHIPPING
11 May 2012 - 00:01
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