More blank sailings, which have kept freight rates relatively firm during the Covid-19 crisis, announced for the third quarter, as demand remains weak.
Container lines last week announced further significant service cancellations to take effect from the third quarter, which starts next month, as ocean freight carriers try to maintain the freight rates they have achieved in recent months despite the drop in demand due to the coronavirus pandemic.
Consulting group Sea-Intelligence said there had been a sharp increase last week in the number of service cancellation announcements for the third quarter across the combined major deepsea trades from Asia to Europe and North America. For these trades alone, around 15% more capacity is being removed from the market in the announcements of the past week, taking the total amount of announced blank capacity for this year so far from 3.4 million teu to almost 4 million teu.
“It is very clear that the plateau we had reached for the second quarter has now seen a drastic upwards change,” Sea-Intelligence CEO Alan Murphy said. “This also means that the amount of capacity removed from the market in 2020 is now more than three times larger than the amount of capacity which was removed due to Chinese New Year – principally driven by a sharp increase in blank sailings for the third quarter.”
Although some blanked sailings have been reinstated on certain trades over the past few weeks, these had only served to reduce the number of cancellations and “by no means indicate a reversal to normal market status”, Sea-Intelligence said.
“The data clearly shows that reinstatement of capacity cannot in any way be interpreted as a sign of strong demand. That we are now seeing full ships on some trades, and even cargo rolling in ports in Asia, is clearly an indication that too much capacity had been removed, but not an indication of a reversal to norm.”
The total of more than 3 million teu cut from the market in weeks 5 to 26 this year on the main intercontinental trades is equivalent to between 15% and 20% of capacity during the equivalent period of 2019.
Good capacity management has served carriers well during this year’s crisis in terms of maintaining and even increasing freight rates. The World Container Index assessed by Drewry, a composite of container freight rates on eight major routes to and from the US, Europe and Asia, is currently around 22% higher than a year ago, with Shanghai-Rotterdam prices up around 16% in the first week of June compared to a year earlier.
And according to Freightos, China-US West Coast are around 32% higher than a year ago, with China-US East Coast prices roughly level with prices a year earlier.