[190211.EN.SEA] Asia-Europe Supply Surplus To Be Short-lived, But Concerns Grow For Intra-Asia

OVERSUPPLY on the Asia-Europe trade is likely to be short-lived, according to industry sources, but fears for a supply and demand imbalance on the Intra-Asia trade are rising. Chinese-based shipping lines, China Cosco and China Shipping Container Lines (CSCL) management appear to be unconcerned with the possibility of excess capacity operating on the Asia-Europe trade this year, judging by comments made to UBS Securities.  According to a recent report by UBS analyst, Richard Wei, Cosco management believe that through the collective efforts of a number of shipping lines operating on the trade, that load factors will remain above 90 per cent this year, even with the expected influx of mega vessels. The positive outlook is shared by CSCL.  "Management think the large vessel delivery will only be a temporary concern to AE [Asia-Europe] rates because of cascading effects. By end 2011 when AE is gradually dominated by large vessels, the route will have [a] high entry barrier to small operators, and close cooperation will reduce rate volatility,” the article said.  But this cascading of capacity may see an intensification of competition in trades like the Intra-Asia trade, where a lot of vessels may be sent into, given the low entry barrier and continuing growth in that market, the carrier’s management said.  Looking at the wider container shipping market, RBC Capital Markets is less optimistic, arguing that supply will outpace shipping demand this year, thus forcing greater downward pressure on rates across all trades, which are already in decline.  However, the figures cited by RBC Capital are not overly alarming, and at least on the surface, give little indication as to whether ongoing rate drops should be expected this year.  Alphaliner has projected that the container carrying fleet will grow by 8.7 per cent this year, while demand will grow at less than eight per cent.

Source : CSM, 28.01.11.