[190316.EN.BIZ] Drewry: Cascading Mega Ships On Transpac Ruinous For Rates, Congestion

DREWRY Maritime Research has sounded another warning about cascading mega ships on the west coast as CMA CGM is intent on doing in deploying its 18,000-TEUers to the US west coast.

Not only will the extra capacity drag rates down, news that the 18,000-TEU CMA CGM Benjamin Franklin took six days in Los Angeles to turn around, is not the way to profitability, said Drewry.

"More carriers may follow CMA CGM's lead and cascade big ships into the transpacific, but they risk harming the utilisation and freight rates unless they drastically reduce the number of services," Drewry warns.

Cargo demand on the transpacific is "soft", says Drewry, and if more lines adopt CMA CGM's strategy without rationalising the number of services it would hurt both rates and yield.

"If they do make the move, carriers will also have to accept their primary assets will spend more time at port and will therefore be less financially productive, at least until the US west coast has fully got up to speed," said Drewry analysts.

The French shipping giant has realised that it has a surplus of big ships on the faltering Asia-Europe route and decided that the relatively stronger Asia-USWC route can take up some of that slack, said Drewry.

"Then there is the question of US ports ability to efficiently turn around big ships, particularly if lots more follow," Drewry said.

Although US ports were upgrading infrastructure to handle larger ships, Drewry said the driver of the strategy was really the poor outlook for the Asia-North Europe trade which was "saturated by big ships" with more to come from a stacked orderbook this year and in 2017.

"All told, from now until 2019 carriers will need to find homes for seventy-two 18,000+ TEU ships so broadening the number of trades they can enter is vitally important," said Drewry.

Source : HKSG / Photo : Marine Traffic..