[190513.EN.SEA] Urgent Action Still Required Between Asia and North Europe: Drewry

CONTINUING recession in Europe is badly timed for ocean carriers with deliveries of an armada of ultra large container vessels coming before the end of the year, says analysts at Drewry Maritime Research in London.

Add to that lack of demand and the abundance of tonnage, is the parallel collapse in westbound freight rates, but which can be reversed by more radical changes on the supply side, said the Drewry report.

The latest cargo flow figures for March confirms that westbound volumes from Asia to Northern Europe are still falling after taking into account seasonal factors.

The 714,000 laden TEUer out of Asia was 7.8 per cent lower than the same month last year. Although this took 1Q13's monthly average up to 729,000 TEU, 3.8 per cent more than between October and December, it was still five per cent below the monthly averages achieved in each the previous two quarters.

The market should be receiving more promising signals about the peak season to come in the third quarter in May, but nothing has yet appeared. The problem is most of Europe is in or is close to recession, and there is little light at the end of the tunnel, the report said.

At the end of April, ocean carriers still had another 31 ships over 10,000 TEU due for delivery this year, including Maersk's first 18,000-TEU goliaths, and their delivery schedule was originally organised around peak season growth, not a recession. April's total effective westbound vessel capacity of 843,161 TEU was virtually the same as in March. Another six sailings were cancelled, the same as in March, but much less than the 11 in January and 10 in February.

Eastbound cargo shipped out of northern Europe to Asia in March remained static compared to February (395,000 TEU). This brought the average monthly volume in 1Q13 up to 381,000 TEU, four per cent more than in the previous quarter, Drewry said.

"Whilst much continues to be made of China's growing import potential stemming from income redistribution and increased national wealth, the value of its containerable imports from Europe in 1Q13 was still seven per cent less than in the same period last year, which suggests that if Europe is to export itself out of recession, it will have to be in bulk commodities," the Drewry analysts.

"On the other side of the equation, vessel capacity in March (614,984 TEU) was 2.6 per cent higher than in February, so average vessel utilisation fell from a poor 65 per cent to an even poorer 64 per cent. By the time Evergreen has finished making all its changes in June, the total effective eastbound vessel capacity offered by all carriers in April will be reduced by 4.8 per cent," the report said.

Source : HKSG.