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Asia-Mediterranean Trade Is Still “Over-Tonnaged” Says Drewry

The Loadstar
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November 28, 2016

By Mike Wackett (TheLoadstar) The Asia-Mediterranean trade is still “over-tonnaged”, with headhaul ship utilisation below other major east–west markets, according to Drewry.

And it believes the new alliance schedules for next April “do nothing to address this issue”.

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Drewry Maritime Research data reveals that Asia–Mediterranean headhaul slot supply had grown 12%, year on year, by August, against container traffic expansion of about 3%.

However, the collapse of Hanjin Shipping, resulting in the immediate suspension of the CKYHE alliance’s MD3/HPM pendulum service, on which only Hanjin ships were deployed, had the effect of correcting the imbalance.

Nevertheless, Drewry notes that despite Hanjin’s sudden withdrawal, it was still not enough to raise utilisation levels above 80% in the third quarter, thus exerting pressure on spot market freight rates on the route.

For example, westbound supply in September was 515,000 teu of capacity against demand of 405,000 teu, resulting in an average load factor per vessel of 79%.

Drewry expects the temporary merging, at the end of October, of the Ocean Three’s Adriatic (PHOEX) and Black Sea (BEX) loops, as part of the vessel-sharing group’s winter programme, will “no doubt improve load factors” on the trade.

But the maritime consultant is concerned that the recently published pro-forma networks from the Ocean Alliance and THE Alliance do not address the inherent overcapacity issue, and threaten to throw the supply – demand balance of the tradelane out of kilter.

The Ocean Alliance has announced five Asia–Med end-to-end services, with two of its loops making wayport calls at Piraeus and Tangier.

Meanwhile, rival THE Alliance will offer three end-to-end weekly sailings, with one of its North Europe loops also making a call at an unspecified West Med hub port.

“If the 2M does not increase the number of sailings it offers the Asia–Mediterranean market next year, (currently four end-to-end loops) and Zim retains its two services, then the number of dedicated connections will next April total 14, which is identical to what is provided today,” said Drewry.

Along with the tradelane’s service over-tonnage, it is likely that the vessels deployed on the route will also be bigger, as a consequence of the cascade of ships from the Asia-North Europe route to accommodate new ultra-large deliveries next year.

And Drewry is warning of the negative impact on Asia-Mediterranean rates from the proposed alliance schedules.

It notes that the westbound spot market “has become appreciably weaker” in 2016 compared with North Europe, in contrast to the previous year when Mediterranean rates outstripped North Europe prices by an average of more than $100 per teu.

However, in recent weeks the Asia-Med spot market has been relatively robust, no doubt due to the Hanjin effect and the Ocean Three service rationalisation.

Last week saw the Asia-Med part of the Shanghai Containerized Freight Index (SCFI) edge up by 2.1% on Friday to $725 per teu, in contrast to North Europe which was recorded down slightly at $775 per teu.

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