[230313.EN.SEA] Drewry Warns Of More Cancellation, Space Shortages And Volatile Rates

SHIPPERS are facing uncertainties prompted by the sudden, high number of container service sailing cancellations, which rose to 150 on the transpacific and Asia-Europe trades between October and February, according to Drewry Maritime Research.

It says the sailing cancellations have had demonstrable effects on freight rates and regularity of service provided to shippers.

Drewry analysts said the ocean carrier strategy has boosted average ship utilisation and spot market freight rates have increased seven per cent on the two trade lanes.

Cancelled sailings in February are estimated to have reduced available capacity in the head-haul Asia-west coast North America route by about 100,000 TEU, and services were thereby operating at only 90 per cent strength.

"The capacity reduction increased average eastbound ship utilisation from the 72 per cent it would have reached at full strength to a more respectable 79," a release said.

"The practice of blanking sailings is not new, particularly around Chinese New Year, only the duration since October has changed. "Although the strategy achieves the same result as the withdrawal of services at the end of the peak season - namely stopping average vessel utilisation from falling to keep freight rates up - the effect on shippers is completely different," said Matthew Beddow, manager of Container Insight Weekly that produced the report.

"Shippers know where they stand with well managed service withdrawals, whereas sailing cancellations sometimes confront them with unexpected space shortages, roll-overs and shut outs, as vessels quickly fill up."

Freight rate changes caused by sailing cancellations also appear more volatile for shippers than those achieved through service withdrawals, with any increases being quickly lost once normal service resumes, according to the London consultancy.

Drewry analysts concluded that head-haul freight rates from Asia to Europe and North America will continue to fall in March "unless further capacity management action is taken, or serious cargo growth outside of normal seasonal trends reappears, which is unlikely".

Although no sailing cancellations have yet been announced for March and April, these are usually peak months for cargo growth, so ocean carriers are probably just be in "watch and wait" mode.

"Uncertain cargo growth to Europe and the US will encourage ocean carriers to continue with short-term vessel capacity planning, which means more sailing cancellations to come. The problem will be exacerbated as service upgrades enforced by newbuild deliveries and cascading gain momentum," Mr Beddow said.

Source : HKSG.