Shippers tip slowdown on Asia to Europe lane

Despite the amount of positive thinking prevailing among those involved in the Asia-Europe trade that the so-called recession is in the past, there are mixed feelings as to whether the lines actually got it right and the market rebound has been as strong as predicted.

There are already suggestions that the fourth quarter will see a cut in ship capacity and a withdrawal or merging of services to help lines adjust to the slack season.

Several lines have already said they would withdraw capacity from October onwards, and some sceptics said that the rush of new capacity in the so-called peak season build-up was "probably far too much".

There are also strong signs that from late September onwards, volumes will fall off rapidly. Some big names involved in the trade have sounded alarm bells that from October onwards cargo bookings are no where near the levels initially expected.

The caution is mostly being voiced by the shipper and freight forwardings sectors, who generally believe there is too much capacity in the trade, and that unless the level is adjusted to market demand as soon as possible, there will be another disastrous slack season coming up.

One major Asia freight forwarder involved in the trade told Cargonews Asia: "From October onwards it looks anything but good with bookings, and unless capacity is withdrawn, the market will once again be in a complete mess."

A UK-based shipper agreed. "There is far too much capacity in the Asia-Europe trade, and we are actively pushing for reductions in rates as we honestly do not see any space problem.

"During the fourth quarter, there are at least 15 newbuildings over 10,000 TEU capacity being delivered, and at that capacity, they must be headed for the Asia-Europe trade. Simply, with another 150,000 TEUs of extra capacity coming in, we are in for a disaster.

"As far as the earlier proposed peak season surcharges (PSS) are concerned, we believe it was all a load of hot air from shipping lines. Sure there is a peak season, but why push such huge surcharges in when the space is there to cater for the demand. They were never going to stick."

Most shipping lines, however, disagree, and while few talk of exact numbers, they do confirm capacity utilisation is presently running in the mid to high 90 percent, suggesting they have judged it correctly on the supply-demand side.

This belief is also backed up by general comments from the lines that September is historically a month when there is rolling cargo in the Far East, where shipments head for the following sailing than that originally intended.

One line executive said: "This year, we are not seeing any roll-over cargo onto the next sailings as we have experienced in the past," suggesting that the supply-demand ratio had been correctly addressed.

Normally, the Asia-Europe peak season volume increase is around eight percent, according to figures provided in the past from the FEFC (Far East Freight Conference), and the lines generally believe market growth is still in the single digit level for the 2010 peak season. But, according to figures compiled by PR News Service, the increase in Asia-North Europe capacity in the third quarter against the second quarter is around 13 percent, and it is certain capacity will once again be taken out in the fourth quarter and services either withdrawn or merged.

Presented with the figures, a shipping line manager said: "It doesn't take too much to work out that with a slack season demand of around three to four percent, we need to move fast and get the ratios correct.

"We will definitely withdraw one of our services on this trade come October - a move that will surely lead the way for the rest to follow," he said.
(Source:www.cargonewsasia.com)