As long as they are able to obtain premium rates, ocean carriers could decide to increase the service speed of their ships on the Asia-North Europe trade lane to mitigate the impact of Suez Canal diversions.
Red Sea Crisis
With the Red Sea crisis unlikely to be resolved any time soon, shipping alliance members are busy recalibrating their networks to factor in the longer transit times of rerouting loop vessels around the Cape of Good Hope Moreover, in the process, the lines are consulting with their key accounts to determine the impact of the supply chain extensions.
“Nobody wants to be offering the slowest transit times from Asia after Chinese New Year when we expect demand to be slack again,” a carrier contact told The Loadstar. Indeed, the lines will be aware that following a huge surge in Asia-North Europe container spot rates since December, which saw average head haul prices triple, rates on the route had begun to ease towards the end of last week.
Today’s Ningbo Containerized Freight Index (NCFI) recorded a week-on-week 8% drop in its Asia-North Europe component, as it reported that “carriers had to undersell their space to canvass more shipping orders”. Meanwhile, Drewry’s Simon Heaney said the lines’ network planners would have to “weigh the trade-offs when redrawing Asia-North Europe services, looking for the sweet spot that minimizes additional time, disruption and cost”.
Options To Be Considered
Drewry’s research considered two options that the network planners could consider. Scenario one is that carriers add two vessels to each alliance loop at the current average service speed of 13 knots, to maintain a weekly sailing frequency, thereby increasing round-trip voyages costs by 3%, which Drewry said would be “nearly offset by canal toll savings”.
In the second scenario, if vessels increase their service speed to 19 knots, this would enable last-port-Asia to first-port-North Europe loops to be maintained, but that would entail a substantial 21% increase in round-voyage costs. “Given that carriers are in cost-saving mode and that there is a surplus of ship capacity, it’s improbable that ships will be set to maximum design speeds,” argued Mr Heaney.
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Source: The Loadstar
