Monday, April 1, 2019

Ocean Container Freight Services from Asia to Northern Europe in a State of Flux - As Ever

John Good Shipping Points Out Some Significant Changes to Box Rotations
Shipping News Feature
ASIA – EUROPE – The container freight sector has seen some enormous changes in the past few years, not least the growth of the 'mega carriers', begun when the world's largest box carrying company, Maersk, announced the Triple E series of ships back in 2011, the giant vessels ordered at a time when economies were in a state of recovery.

Shipping, however, is often not a particularly stable trade, and it takes years, not weeks to build vessels, particularly when they can carry upwards of 18,000 TEU. Back then every other major carrier battled to match the Danish group and before we knew it there were 300 plus metre long ships appearing at a rate of knots under every flag. However merchant vessels need cargo in order to operate at a profit, and running these leviathans half empty is no way to do business.

The sudden plethora of available space has had two major effects. One was the introduction of slow steaming, taking longer on a route simply means there is less available capacity for cargo waiting to ship at any one time, together with the added bonus that it is a lot cheaper to run these huge vessels at slow speed when fuel is the most significant cost output. Time in each port is also stretched as more boxes need to be discharged and loaded from the ever bigger ships.

The second factor is one which has brought a smile to those of us in the industry who witnessed the demise of the container Conferences all those years ago. They were the affiliations between rival ship owners who agreed to charge uniform rates for services. There were ‘closed’ Conferences, whereby a line could only get access with the agreement of existing members, and ‘open’ in which anyone could trade under the regulations of the Conference provided they met all the criteria.

These of course were then deemed ‘anti-competitive’ by the authorities and were outlawed. Now however we have seen the rise of ‘the Alliances’, or not if that term offends the market competition officials, in which case they become ‘vessel sharing arrangements’. Whatever you call them, they too are having a marked effect on the trade, enabling former rivals to ensure vessels take a more realistic complement of cargo on each voyage.

Last month Hull based agency John Good Shipping ran an analysis of the deep sea trade most affecting customers in the UK, namely the networks operating between Asia, principally China, and Northern Europe, pointing out that the end of March saw significant service changes resulting in longer transit times.

The John Good piece states that, mainly due to the factors already mentioned, fuel saving and slower turn rounds, transit times Asia to northern European ports has increased by over 30% since 2007. This statistic is matched with the fact that in the same time period average vessel capacity has more than doubled to around 15,000 TEU.

The latest changes are likely to mean transit times will rise again to record levels with both members of the 2M Alliance, the world’s two biggest ocean box carriers Maersk and MSC, extending two of their routings, AE-5/Albatross and AE-10/Silk, to thirteen weeks. Meanwhile the horribly named THE Alliance has also stretched the rotation of its FE5 rotation from nine weeks to 10, while Hyundai Merchant Marine (HMM) has extended its standalone AEX service from 10 to 11 weeks.

John Good calculates that there will also be an additional 300,000 TEU added, current capacity growing by 8.3% as carriers increase capacity between Asia and Northern Europe. Ocean Alliance partners are increasing capacity by 22% whilst The Alliance increases by 5%, and it is anticipated that HMM will add almost an extra 25% to the capacity of its AEX service as it replaces its current fleet with 6,300-6,800 TEU vessels. 2M however, is reducing its capacity by 5% by using smaller units on three loops.

These changes indicate that, once again there are no sure things when it comes to world trade. Predicting the future is an uncertain, and potentially expensive game for shippers and shipping lines alike. With the added factors of sanctions, uncertainty as to future trading partnerships (avoiding the B word) and with one eye on the regulatory authorities which have a track record of suddenly deciding what was OK one year is suddenly a heinous offence the next, overall the next 12 months may well prove interesting.

Photo: MSC Oscar at 19,000 plus TEU for a time the largest box ship in the world.