Carriers add capacity in slack season despite falling Far East-Europe rates

CAPACITY deployed on the Far East-Europe container trade has risen by one-fifth since the start of 2010, with the weekly supply increasing from 311,000 TEU in January to 375,000 in December, reports Alphaliner.

"Although volumes transported have diminished with the winter season, there is no significant slack season capacity adjustment this year. The carriers appear to be going back to their pre-crisis mode to grab market share even as freight rates have dropped precipitously since August," it said.


Alphaliner noted that spot rates have declined by 30 per cent since July, and warned that there is still room for rates to slide further in the next few weeks. It claimed rates of below US$1,200 per TEU are now being offered in the spot market which is less than the SCFI`s latest reported spot rate of $1,337 per TEU from Shanghai to North Europe.


"Carriers appear to have abandoned their earlier commitments to withdraw capacity to sustain freight rates," said Alphaliner.


It pointed to the reintroduction of two services withdrawn for the winter period, with Maersk`s AE-9 service resuming in December after a temporary suspension of four weeks. The Grand Alliance`s Loop D will recommence its weekly frequency in January, after having sailed at fortnightly intervals since October.


PIL and Wan Hai have also in mid-December started a new Far East-Black Sea service, "with more capacity additions from other carriers due early next year," it said.


"These moves could undermine efforts to raise rates as they bring back capacity during a period when carriers are already jittery over falling utilization levels. The limited measures to constrain capacity in the last two months have not had the desired effect on freight rates, as rates on the spot market continued to be pushed down," said Alphaliner.


It highlighted that since Maersk and the Grand Alliance announced their winter capacity withdrawals in October, freight rates have decreased by between $200 and $300 per TEU from $1,500 per TEU.