The traditional peak season on the major trades ought to be gearing up firmly, although the data does not (yet) support that notion. The challenge in regard to demand data is that any solid data source available tends to be somewhat lagged. Globally Container Trade Statistics has the most solid data especially on the major east-west trade and measure at time of loading. But sadly data is only issued monthly with a time delay. The latest data relate to May where global demand in terms of TEU*Miles was basically languishing at a minor decline of -2.5% year-on-year and a decline of -1.1% compared to May 2019 before the pandemic.

Despite these poor numbers, this is an “improvement” compared to the period from September 2022 to February 2023 where the rate of decline was much more severe.

At the same time carriers are beginning to take delivery of the many new vessels, which were ordered in the boom years of 2021-2022. Since January 2023 the global fleet of container vessels has grown 4.3% and, if we compare to the beginning of August 2022, the global operational fleet has grown 6.2%.

At the same time carriers are beginning to take delivery of the many new vessels, which were ordered in the boom years of 2021-2022. Since January 2023 the global fleet of container vessels has grown 4.3% and, if we compare to the beginning of August 2022, the global operational fleet has grown 6.2%.

Such capacity growth when seen in the light of the weak demand growth would either lead to a continuing downturn in freight rates or a much more active approach by the carriers to limit the capacity on offer.

Over the month of July, we have essentially seen both with different trade lanes experiencing a different impact.

When the weekly blank sailings are analysed, the Pacific is clearly the trade with the largest number of cancelled sailings. At the end of July, 16% of the usually scheduled sailings had been cancelled. Furthermore, the data shows that the carriers’ announcement of new blank sailings rose substantially at the end of June, coinciding with the rally in rates.

On the Transpacific trade, spot rates tended to bottom out in late June, followed by a continued increase. It would be misleading to call it a strong increase, but certainly sufficient to get to levels substantially above pre-pandemic terms and presumably set the carriers on the path for better profitability in the trade. This surge in rates is fuelled by an active approach to capacity management. When the weekly blank sailings are analysed, the Pacific is clearly the trade with the largest number of cancelled sailings. At the end of July, 16% of the usually scheduled sailings had been cancelled. Furthermore, the data shows that the carriers’ announcement of new blank sailings rose substantially at the end of June, coinciding with the rally in rates.

Regarding the Asia-Europe service, it would be more accurate to say that the rate level has stagnated at a relatively low level. In this case the carriers have been less active with blanking sailings. Whilst they did blank 12% of the planned sailings at the end of July to Northern Europe, they only removed 5% of the sailings to the Mediterranean.

On the Atlantic the situation over the past few months has gone from one of rapid normalization of the freight rates to an outright collapse. Within a span of 5-6 weeks the rates went from being nicely above pre-pandemic levels to now being substantially below. This is almost classical behaviour. Whilst the rate levels were high the carriers were shifting more capacity into the trade to capitalise on the strong conditions – knowing full well that this would be only for a limited time. When the rates then fully collapsed, they had not yet prepared a plan for removing capacity and there has not yet been any effective material cancellations of sailings. It should be expected that this will change over the coming month.

About Lars Jensen, CEO, Vespucci Maritime

Lars is a leading expert and thought leader in analyzing global container shipping markets. Lars has 19 years’ experience hereof the last nine within multiple companies he has founded, with the main focus as CEO of Vespucci Maritime.
 

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