Less than six weeks before the usual annual shutdown of China’s manufacturing production and the slowdown of the ocean logistics systems that support it, container lines have only cut a small number of services.
As strong ocean freight demand continues on the major trades, container lines look set to blank far fewer sailings around Chinese New Year (CNY) than in previous years with less than six weeks left before the usual annual shutdown of China’s manufacturing capacity and the normally associated slowdown of the ocean logistics systems that support it.
Container shipping analysts Sea-Intelligence highlighted in its weekly Sunday Spotlight briefing that in a “normal” year, carriers would announce significant numbers of blank sailings in connection with the lunar new year, in order to balance supply to the lower container shipping demand, due to factories closing over the lunar holiday.
“However, 2020 has been far from normal, and there does not seem to be any consensus forecast on the production impact of CNY in 2021,” noted Sea-Intelligence CEO Alan Murphy. “With these uncertainties, carriers are likely having a difficult time planning their capacity management for CNY 2021, but with under six weeks left, the clock is ticking.”
Analysis by Sea-Intelligence indicates that as of 1 January, carriers had only announced five blank sailings on the transpacific trade and seven on the Asia-Europe trade in the three-week Chinese New Year period (weeks 7-9).
“This is against 88 combined blank sailings in 2020 – 73 if we discount the ones that were announced due to Coronavirus – and 67 in 2019,” noted Murphy. “For 2021, this translates to a scheduled capacity reduction of 2-4% on transpacific and 6-13% on Asia-Europe.”
Analysis of the currently scheduled capacity deployment for the Asia-North America West Coast (NAWC) trade four weeks before CNY to three weeks after CNY for 2021, and compared to the same weeks in 2016-2020, indicates that “at present, CNY reductions are hardly visible for 2021”, Murphy underlined.
As the 2020 CNY blank sailings period was heavily impacted by the subsequent blank sailings due to Coronavirus, in order to provide a more reasonable comparison with 2021 and previous years, Sea-Intelligence has also done a separate comparison that only includes the 2020 blank sailings that were announced four weeks prior to CNY 2020, so as not to include the 2020 Coronavirus blanks.
“At present, 2021 CNY blank sailings are far below previous years, and if the relative capacity reductions of previous years should be reached, carriers would need to blank 37-41 sailings on Asia-NAWC, and 12-15 sailing on Asia-North America East Coast (NAEC),” Murphy said. “On Asia-North Europe (NEUR), an additional 14-17 sailings would have to be blanked to reach previous relative levels, while on Asia-Mediterranean (MED), an additional 4-6 sailings would have to be blanked.”
He concluded: “It is not possible to predict the optimal level of blank sailings, but it is clear that the carriers are currently scheduled to blank far less than in previous years, and if they are to reach the level of previous years, a raft of blank sailings would have to be announced very soon.”
Demand stays strong
Separate analysis of pricing and demand by freight rates and digitalisation specialist Freightos noted that 2020 ended with ocean freight rate increases on Asia-US lanes, “hinting that the continued surge in demand – including added Chinese New Year (CNY) pressure – would be enough to push up transpacific rates that had plateaued following mid-September pressure from Chinese regulators. But carriers walked back those increases to start the new year, as prices dropped to their previous plateaus.”
Nevertheless, while rates from Shanghai to the US dropped back slightly in the first week of January, average prices to the US west coast remain above US$4,000 per feu, and above $4,700 to east coast ports, according to the Shanghai Containerized Freight Index. Meanwhile, transpacific backhaul rates for US exporters jumped 36% for the West Coast to $703/FEU, and 25% to $769/FEU from the East Coast, as carriers try and balance export demands with pressure to move empty containers, Freightos noted.
And these same market forces kept pushing rates up from Asia to North Europe and the Mediterranean, where prices increased by about 30% on both lanes this week, Freightos highlighted, adding: “Rates on both lanes are now at the incredible $7,000/FEU level before surcharges, having tripled since the end of October, and also tripled year over year.
And with no detectable let up in demand, observers are now predicting congestion, delays, equipment shortages and high rates to possibly persist even past Chinese New Year and into the second quarter of 2021, Freightos noted.
“But there may also be a couple bright spots for shippers. So far, carriers have announced far fewer than normal blanked sailings around the CNY lull, which may indicate they will use that time to help relieve the empty container imbalance,” Freightos CMO Eytan Buchman speculated.
Source: Lloyd’s
