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Transatlantic
Again the shipping world keeps on being very interesting and often even the insiders are missing the logic behind the business, the volumes, the rate levels etc.
Reading the Drewry report we are surprised to learn the the volumes across the Atlantic were less in the first months of 2014.
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Drewry: Northern Europe-North America lanes evolving
Corianne Egan, Associate Editor | Jul 09, 2014 2:49PM EDT
Trade between northern Europe and North America fell in May, but carriers are making moves to keep their utilization rates over 90 percent on both eastbound and westbound routes, Drewry says.
Drewry’s latest edition of Container Insight Weekly says that, North American imports from Europe fell to 238,000 20-foot-equivalent units in May. Containerized exports from North America to northern Europe dropped from 200,000 TEUs in March to 188,000 TEUs in April.
The decrease comes at a time where cargo shipments should be up, as peak season is beginning, Drewry said, and this is worrying for ocean carriers. According to recently published data from the U.S. Department of Commerce, the United States’ gross domestic product shrank by an annual rate of 2.9% in the first three months of the year.
“As much of this was weather related, the subsequent downturn in trade suggests that other factors have taken over, including a big decrease in unemployment benefits,” Drewry said.
But Drewry also noted that carriers have avoided dropping vessels in the trans-Atlantic routes, so capacity and average utilization rates have been kept high.
Much of the trans-Atlantic lane’s changes have been due to the G6 Alliance’s new schedules. The G6 put its new schedules into effect in late April, and Drewry called the implementation a messy process, noting that vessels were not in the right place at the right time. G6 carriers did add about 9 percent capacity to the northern Europe-U.S. lane when the new schedules came on board, but Drewry reported capacity on the trade fell 2.3 percent in June regardless.
Both Mitsui O.S.K. Lines and APL told customers in May that a space shortage could last into mid-June. The G6 includes APL, MOL, Hapag-Lloyd, Hyundai Merchant Marine, NYK Line and OOCL.
Trans-Atlantic rates have shown little movement recently.
The average utilization of all vessels sailing from North America to Northern Europe fell from 92 percent in March to 86 percent in April. In theory, Drewry said, that should not have had much impact on freight rates, but G6’s schedule disruptions appear to have forced its members into an uncomfortable corner.
According to the World Container Index, trans-Atlantic shipments eastbound from New York to Rotterdam have remained steady, decreasing by just fractions of a percentage point, since mid-May. The spot rates are, however, showing double-digit percentage losses versus last year. Westbound rates from Rotterdam to New York have shown little movement as well, except for falling about $19 per FEU the past two weeks. Eastbound rates are higher than they were during the same time period in 2013, and have posted year-over-year increases for five straight weeks
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First of all, we cannot see any less utilization of the ships in the first half of the year, which admittedly was also created by the total disaster in scheduling.
In the early weeks of the year, winter and weather problems caused ships to be delayed on the transit and especially in the ports in the USA.
Then the USA was hit by terminal problems, trucker problems and others, causing some vessels to be totally off schedule.
Lines reported to sometimes even have had 3 ships in one week, while other weeks had no sailings.
The next stumble stone in scheduling was the reorganization of the G6 also as a reaction to the anticipated P3 alliance that was planned to be set up between Maersk, MSC and CMA, until Chinese authorities stopped the deal.
The result seems to be that MSC and Maersk will form the 2M agreement, which will coordinate the usage of the fleet of the two carriers.
Anyway, G6 re-arranged the services that ended up in further capacity problems, total negligence of the Florida ports and others.
Fact is that the shippers, forwarders and NVOCCs had to accept some rate increases over the first 6 months on the Transatlantic westbound, some of which were effective as of April 1st, June 1st and now also July 1st.
Rates to the West Coast of the USA were not even discussed anymore as the ships are fully booked up to 3 months in advance. Carriers just sent the amendments to the contracts for signature, which was more or less superfluous as bookings are still not possible.
Rates to the East Coast went up too, same goes for Canada. We see full ships all over the place, we see shut outs of cargo and cargo being rolled from one ship to the next.
Maersk Lines even told us not to call them as they cannot accommodate any business and so it is useless to book cargo with them, which is a total scandal and a mismanagement of the biggest carrier in the world.
On top, the industry is faced with traffic problems around Hamburg as the authorities decided to start street works on all important streets in and around Hamburg at the same time. The result is that the consumer has to pay the bill as truckers and carriers are charging a trucking congestion surcharge of Euro 50 per move.
Transatlantic Eastbound seems to be a problem too, all carriers are crying that they cannot get the TA profitable; the reason is, however, that the rates are too low on the eastbound leg and now everybody wants the westbound to pay the entire bill, which is not possible at all.
Far East westbound is another “erratic” trade. The rates go up and down like a roller coaster; everybody seems to like it, which we cannot understand at all.
Instead of a constant up and down and dealings like in an oriental bazar, it is time that the rates are set and executed on the average level that they normally show over the period of a year. Nobody can run reasonable budgets, the cargo side never knows what the costs will be and the carrier side never knows what the income will look like in the next weeks and months.
Presently Rate agreements over a longer period already exist and they definitely help the situation, but when the contract rates are good after one of the monthly GRIs, the carrier does not want to move the boxes and when the rates are rather on the high side, briefly before another GRI, the customer does not want to ship as he is only supposed to take the downside of such a contract and is never on the winning side.
The capacity usage Far East to Europe seems to have been pretty high, as shut outs happened before the GRIs, when everybody quickly wanted to ship before they would have to pay higher rates. Then the next shut out happened after the GRIs, when the contract rates were too low and the carriers did not want to move cargo at those prices, see above.
Far East eastbound also reports full ships, some carriers are rolling cargo and others limit the number of bookings and TEU that they are accepting to avoid the ugly battle with boxes left behind and their inherited costs.
We will see, if the volume on the different trade lanes will go down at the end of July, when “half of Europe’s population” ends up in the vacation resorts all over the world.
Also there is still some hope that the lines on the Transatlantic will get their scheduling problems sorted out and the trade will come back to a normal cargo versus space situation.
The hope that the Far East trade will ever come to a serious reliable longer term rate does not seem to have any base for the given future.
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