Lines grow capacity and now cancel sailings

The container shipping lines have been increasing their capacity out of Asia, based on strong demand expectations through 2021 and while the increase of deployed capacity has extended, at least through the first few months of 2022, lines are now reacting to short-term demand fluctuation with cancelled sailings and surcharges.

Shipping lines expanded their capacity through 2021 with the deployment of new vessels, the chartering of additional capacity and the addition of hundreds of thousands of new containers to the global fleet.

In the 12 weeks following Chinese New Year, capacity will have grown 20% year-over-year on the Asia to US West Coast trade lane (40% on the East Coast!) and 19.3% on Asia-North Europe, which pundits insist is a firm indication that carriers are expecting no slowdown in demand.

Continuing congestion across ports in Asia, North America, and North Europe, in fact globally on most global trade lanes – and their inland distribution networks – has slowed the working time of vessels and the turnaround of containers, which has had the same impact as effectively removing 10% of global capacity. A conundrum currently that is highlighted with the market impact – which in theory should not be happening. But it is.

It was in an attempt to ease the space and equipment shortage, that carriers ordered hundreds of thousands of new containers and hoovered up every piece of spare shipping capacity they could find last year.

CMA CGM increased its total shipping capacity by 5.8%, Maersk 6.4% and Hapag-Lloyd 4.1%, to a total of more than 10 million TEU, while together, the major carriers acquired a total of 266 second-hand ships.

The carriers expected demand from Asia to Europe to remain strong in the first half, followed by a gradual easing through the rest of the year and not much change in demand to congested US ports and inland logistics before next year. That was of course before Russia invaded Ukraine.

And yet the barest hint of demand softening, as China’s latest lockdowns delay production and cargo availability, has carriers preparing to blank sailings in anticipation of low demand. A useful tool to have in your box.

2M carriers Maersk and MSC have announced three further void sailings for April, attributed to the “ongoing challenging market situation”.

In addition to more cancelled sailings, significant bunker surcharge increases should be expected from the shipping lines, together with rising haulage costs. Reports in the press suggest that ocean carriers in North Europe will add a 25% fuel surcharge to their line hauls from the 1st April.

Global freight operations are transforming, as the intense and sustained pressure that supply chains have been subjected to, expose weaknesses and inefficiencies.

We negotiate rate and volume agreements with a wide range of carriers across all three alliances, which means we can access the widest pool of equipment and offer shippers the biggest range of service offerings, port-pairings and rates.

Please contact Elliot Carlile to learn how we can support your supply chains, even in the most challenging market conditions.