Let’s focus this week in the middle of summer, on the Asia to Europe corridor: Shanghai - Rotterdam.
On the one hand, we can observe several rate increase announcements from shipping compagnies motivated by the « peak season » for shipping from Asia and, on the other hand, compagnies which are making conflicting announcements of cancellations of stopovers and postponements of departures.
This is a contradictory signal being sent to the market that illustrates perfectly the frustration of carrier’s seeing their P&L worsen during this period that should have seen higher volumes from the European FOB retail annualized accounts.
In this particular context, the last quite canny annoncement from 2M Alliance to take the opposite direction by committing to not cancelling ship departures over the period makes perfect sense.
This is by way of acknowledging the fact that the available volumes are not at the levels hoped for. Nevertheless, this alliance is guaranteeing a service to their customers despite the gloomy context, and by doing so are also hoping to increase their overall market share by making this “effort” and to capture additional flows in the spot and CIF markets.
There is so far no evidence of any orders being switched from Transpac contracts to Europe on a large-scale basis as a means to compensate the lack of activity on the Asia-Europe corridor. We have observed that there is very little porosity between these two large maritime markets due to the differences concerning the type of products and their standards.
This week’s market on the Asia-Europe corridor shows once again that the container vessels of more than 18,000 Teus are a nightmare to adequately fill on a weekly basis, and this goes for the whole liner community.
If we now project ourselves directly to early September’s market: the opening of discussions on the BAF proves that the countdown to IMO 2020 is well under way.
This will be without doubt, the last chance for the industry to hope to eradicate the decrease in profit margins per slot and allow those that most efficiently control their costs to avoid finishing the 2019 fiscal year in the red.
The pressure is really building up because it is far from certain that the shipping operators will be able to profit from the boost that came from Trump’s politics this year as they did during the second semester of 2019.
This will be the « Last chance saloon » as once said in the wild wild west!
Photo by Samuel Wölfl from Pexels