Liners Reinsert Services To Restore Capacity During COVID-19 Crisis

95

Liners reinserting sailings on the transpacific which had previously been cancelled, reports Splash 247.

Increase in demand

Transpacific 

THE Alliance, which features Hapag-Lloyd, HMM, ONE and Yang Ming, is now reinserting two sailings on the transpacific which had previously been cancelled. 

Asia-Mediterranean 

THE Alliance also reinserted four previously cancelled sailings on the Asia-Mediterranean tradelane.

Lars Jensen from SeaIntelligence Consulting wrote on LinkedIn:

“This tells us, at least for now, that the demand downturn has bottomed out and carriers – at least in THE Alliance – are now seeing sufficient demand for their remaining services to even up the capacity a bit.”

Capacity management 

Jensen said that the news from THE Alliance explains the carriers’ approach to capacity management in the current crisis.

“They would rather proactively cancel too much capacity and then later re-insert in case there is more demand, instead of hoping for demand to materialize and then have to either cancel at the last minute or sail with underutilized vessels.”

Historic high blanked sailings

According to a latest Consultancy Sea-Intelligence report, the volume of blanked sailings had hit an historic high, passing the 500-mark.

BIMCO data shows blanked sailings on the fronthaul trade out of Asia towards Europe last week are estimated to have reached 28% of total tradelane capacity.

BIMCO’s chief shipping analyst Peter Sand echoed Dane, Jensen saying “May is likely to see a peak in blanked capacity.” 

Higher cargo volumes 

The new BIMCO report suggested, for the coming weeks, to end-July, carriers are expecting higher cargo volumes on the front-haul, despite the seasonally lower nature of May to July.

Strong freight rates

  • Global carriers in the main have been reporting solid Q1 results of late bolstered by strong freight rates enforced by the blanked sailings. 
  • Q2 is expected to be more painful. 
  • US retail sales for April have just been published and give a glimpse of the dramatic drop in consumer appetite. 
  • Clothing sales in the US, for instance, plummeted 89.3% last month.

Price war under control

A key to getting the volatility and destructive price wars under control, according to Jensen, has been getting a combination of only a few large players and better price transparency.

Blank sailings

The carriers have significantly increased the use of blank sailings over the past 24 months in the main trades to get better control over what Jensen described as “tactical capacity”. 

The pandemic served as a “trigger” to accelerate this practice with the latest utilisation rates published by the Shanghai Shipping Exchange showing ships are still sailing approximately 90% full on the main tradelanes.

Andy Lane from Singapore’s CTI Consultancy cautioned: 

“Reaching the bottom is some positive news, and hopefully that will be the case. Although the West appears to be starting to come out of lockdown, I would be surprised if we witnessed a sudden and massive spike in new consumer product orders already now. I would not expect consumer confidence to be overly high for at least a couple of months.”

Inactive containership fleet surge

The latest data from Alphaliner shows the inactive containership fleet has surged to a new record of 524 units equivalent to 2.65m teu as at 11 May. This surpasses the previous high of 2.46m teu at the beginning of March this year. The inactive fleet currently accounts for 11.3% of the total containership fleet capacity.

Carriers have yet to show their hand when it comes to slashing schedules in the third quarter.

Blank sailings will increase again?

Sea-Intelligence suggested in its Spotlight report:

“It appears exceedingly unlikely that demand will revert back to normal from July 1st. We would therefore expect the level of blank sailings will once more start to increase, as carriers become forced to take a stance on their capacity management for Q3.” 

Did you subscribe to our daily newsletter?

It’s Free! Click here to Subscribe!

Source: Splash 247

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.