Ocean carriers’ plan to dump surplus 8,000-TEU vessels on the Asia-South America East Coast (ECSA) trade lane in July will result in overcapacity and freight rate erosion, warns Drewry Maritime Research.
The launch of MSC’s new Ipanema service in mid-April and plans by other carriers to deploy much bigger 8,000-TEU vessels will result in “a massive 33 percent increase in capacity” between April and July, said Drewry on its online Container Insight Weekly.
Even before all of the plans have been implemented, they have triggered a rate war, with spot prices from Shanghai to Santos collapsing by 26 percent between April and May, down to $2,810 per 40-foot container, according to Drewry’s Container Freight Rate Insight.
Since the middle of April, the decline was reportedly even higher, and rates were still dropping in the first week of June, “indicating that no one wants to be muscled out of market share peacefully,” said Drewry.
The additional capacity is coming from three services: MSC’s new Ipanema service, the current upgrading of vessels deployed in Evergreen/Coscon/Zim’s ESA schedule from an average of 6,212 TEUS to 8,500 TEUs, and the rationalization of the three networks offered by Maersk Line, CMA CGM, Hamburg Sud, CSAV, CSCL, and Hanjin Shipping.
From July, the three services will deploy 33 vessels averaging 8,000 TEUs instead of 35 vessels averaging 6,295 TEUs.
Drewry said that cargo growth could not be the reason for the changes in services. There was year-on-year growth of 4.7 percent from Asia to ECSA in the first quarter of 2013, up to 343,000 TEUs, and 12 percent growth on the backhaul leg to Asia, up to 132,600 TEUs. But the increase was spread over 12 months, while the planned 33 percent growth in vessel capacity will be accomplished within just three months.
“As much as ocean carriers would like to hide surplus 8,000-TEU vessels on the north-south trade lanes, this cannot be achieved in the current poor economic climate without creating overcapacity and rate reductions,” Drewry said.
Photo: Henrique Vicente