[190120.EN.BIZ] Container Lines Blank More Sailings to Match Demand, Bolster Rates

THE downturn in US-China trade is prompting major container shipping lines to scrap an expanding number of weekly transpacific sailings. The cancellations suggest a longer recovery in trade between US and China, and heralds a weak start to the year for US ocean freight.

Some 24 weekly sailings between Asia and the US west coast have been blanked in the first eight weeks of 2020, as reported by UK-based container research firm PR News Service. These sailings will put 198,000 TEU in capacity out of commission over this period, reported American Shipper.

The service cutbacks are a seasonal phenomenon due to China's Lunar New Year. Year of the Rat celebrations begin on January 25, and nine of the cancelled sailings are occurring during that week.

The start of the Lunar New Year holiday will drive "a complete shutdown of China's manufacturing infrastructure, when businesses and factories in China close from one to four weeks," according to Dachser USA Air & Sea Logistics.

During the 2019 Lunar New Year, monthly maritime import shipments from China dropped from 609,000 at end of 2018 to 345,000 by March. Monthly import shipments from China are already starting 2020 17 per cent below what they were at the end of 2019.

However, the number of reported void sailings in the first quarter "does seem to be a little more than in previous first quarters," said PR News Service editor-in-chief Paul Richardson. Thirteen of the cancelled sailings are slated for weeks six to eight, straight after the Lunar New Year period.

THE Alliance of Hapag-Lloyd, Ocean Network Express and Yang Ming is expected to cancel at least 12 sailings over the period. Maersk and MSC's 2M will cut five sailings. Ocean Alliance, which includes CMA CGM, Cosco Shipping, Orient Overseas Container Line and Evergreen, will shelve seven weekly sailings.

Mr Richardson adds that there could be even more frozen sailings that ocean liners are looking to hush up, along with "ships continuing to sail but half-full."

Early indicators on west coast port activity shows a slow start to 2020. Weekly maritime import shipments to Los Angeles are down four per cent from the start of October. Oakland and Seattle imports fell by five per cent and 33 per cent, respectively.

The fourth quarter of 2019 was also a tough one for ocean freight as 32 sailings were cancelled from Asia to all US ports due to the combination of reduced demand and China's National Holiday at the start of October.

The December "phase one" deal struck between the US and China was too late to halt an ongoing slide in Chinese imports. The trade deficit with China shrank to $25.6 billion in November, down from $27.8 billion in October, the Commerce Department said.

The downturn in US-China trade continues to be felt most acutely at US west coast ports. The top four ports saw container import volumes dropped 3.7 per cent through the first 11 months of 2019.

East and Gulf Coast ports saw inbound cargo volumes rise 5.3 per cent over the same time, thanks to their exposure to Southeast Asian and European imports. Still they are not being spared in the first-quarter downturn.

Eleven weekly sailings between weeks four and seven, with a combined capacity of 108,500 TEU, are being blanked during the time. 2M is expected to cancel five sailings, with Ocean Alliance and THE Alliance expected to account for an extra six. Three further sailings from the Mediterranean to the US east coast and one from northwest Europe will be void.

Two sailings on the Asia-US Gulf coast route will also be withdrawn during the first quarter, while another one sailing each from northwest Europe and the Mediterranean to the US Gulf will also be scratched.

Source : HKSG.