Containers

Liners start to reinsert services

Liners appear to have reached peak blank sailing for the time being. THE Alliance, which features Hapag-Lloyd, HMM, ONE and Yang Ming, is now reinserting two sailings on the transpacific which had previously been cancelled. This follows last week where THE Alliance also reinserted four previously cancelled sailings on the Asia-Mediterranean tradelane.

“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,” Lars Jensen from SeaIntelligence Consulting wrote on LinkedIn today.

Jensen suggested the news from THE Alliance demonstrates 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,” Jensen wrote.

Consultancy Sea-Intelligence reported on Sunday that the the volume of blanked sailings had hit an historic high, passing the 500-mark.

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

“May is likely to see a peak in blanked capacity,” BIMCO’s chief shipping analyst Peter Sand wrote in an update today, echoing a similar sentiment to fellow Dane, Jensen.

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, the new BIMCO report suggested.

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 however. 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.

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

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.

Commenting on the blanked sailing news, 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.”

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, surpassing 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.

“Whilst of course nothing can be ruled out, 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,” Sea-Intelligence suggested in its regular Sunday Spotlight report four days ago.

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Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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