Global Market Outlook on Container Shipping Trend Analysis

Global Capacity Development Trends

  • Scrapping of six ex-Hanjin ships: Six ex-Hanjin ships have been scrapped, while all others with the exception of one ship has been taken over by other carriers. SM Line has emerged as the most active buyer.
  • Upsizing of various services along Intra-Asia Routes: Several services across the Intra-Asia and African routes were upsized from 2,800 TEU to 4,200 TEU (Panamax) scale over the past 18 months. The upsized ships are often chartered at lower rates than the smaller ships they have replaced.
  • Ocean Alliance Increases the Number of Direct Far-East to New York links: Ocean Alliance increased its number of direct Far-East to New York links to five as of Oct 12, 2017.
  • Blank Sailing Programs for the Chinese Golden Week: All the three alliances (as in the previous slide) have revealed their blank sailing programs for the Chinese Golden Week period and the week after. Total capacity withdrawn on the Asia-Europe route reached only 29–46 percent of the average weekly capacity deployed, with 2M withdrawing the most capacity.
  • Idle Container Ship Fleet to be Eliminated in 2019: The idle container ship fleet will only be eliminated in Q3 2019. However, there exists a possibility, whereby the announcement of CMA, CGM, and MSC of new order of 20 vessels of 22,000 TEU, could trigger new orders, thus augmenting the existing overcapacity situation.
  • New Building Program Launched by MSC: MSC launched a new building program for 11 Megamax units of 22,000 TEU. The ships will be delivered from late 2019 to March 2020. MSC’s current 20 units are financed by CN, SG, and US interests under leasing or bare-boat terms, with MSC managing the ships.

Freight Trend Analysis: Asia - Australasia & Oceania  

Asia-Australasia Rate Trend

  • Freight rates have been showing an increasing trend for the past few months
  • Space situation from North Asia (China and Southeast Asia) to Australia remained tight throughout August and September, leading to high rates

Factors Impacting the Rate

  • Lack of equipment, Maersk and COSCO blank sailings, and smaller Maersk vehicles will facilitate continued increase in rates after the October holiday

Outlook

  • Outlook is forecasted to be positive for shippers with the fragmented nature of the trade and the cut-throat competition, which places relentless downward pressure on rates that will soon stabilize

Supply-Demand: Europe to Asia Region

Increase in freight volume for the trade route of Europe-Asia in 2017 and the emergence of new alliance networks has resulted in the surge of backhaul rate from North Europe to Asia trade route in 2017 when compared to last year.

The Ocean Alliance, which include CMA CGM, Cosco Shipping, Evergreen Line and OOCL is expected to bring massive capacity in the trade lane battling for market share in coming months.

Demand Trend

  • Growth percentage of TEU volume in H1 2017 for Europe-Asia has outpaced with a growth twice the head haul
  • It is forecasted that demand will grow by approx. 4 to 5% in coming months for Europe-Asia trade lane

Supply Trend

  • Tight capacity was experienced for Europe-Asia trade during the run-up to the launch of the new alliances in April 2017 and a peak season surge in volumes that led to congestion in Europe and Chinese ports

New Vessels Addition

  • It is observed that deployment of 78 new vessels with capacity of 14,000 TEU’s by the end of 2019 will change the supply demand balance in coming months

Opportunities

  • With new addition of capacity in the market in the next few years, freight rates are going to remain stable or will drop in Europe-Asia trade route with liners fighting for market share

Key Parameters for Negotiating Service Contracts

The shipper could consider holding a contract with two carriers within the same alliance to diminish the risks associated with space and capacity issues.

It should be ensured that carriers have capacity on particular routes to handle the freight. The sales representative of the carrier should also provide continuous updates on changes in schedules and rates.

  • Ensuring that carriers have capacity on routes: It is essential to ensure that the carrier has capacity on the particular routes to handle the freight. For example, if NYK is being negotiated with, for the route from the US West Coast to Vietnam, and most of the vessels are operated by “K”Line and Yang Ming, it is important to ensure that NYK has the capacity to meet the requirement, as the first right of refusal typically lies with the owner.
  • Having a contract with two carriers within the same alliance: It is advisable to have a contract with two carriers within the same alliance, as it diminishes the risks associated with space and capacity issues.
  • Having contracts with different alliances on the same routes: It is advisable to have contracts with different career alliances on the same routes (E.g., CMA CGM from “Ocean Alliance” and NYK from “The Alliance”). This provides more flexibility and agility when there are space issues, changes in routings, transit time, and pricing issues, such as GRIs, free time, etc.
  • Getting a continuous update: It should be ensured that the sales representative of the carrier continuously provides updates on changes in schedules and routes.