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Carrier points out possibility of a 'disaster' on Asia-Europe route
The recent spate of alliances on Asia-Europe trade lanes threatens to prolong “unrelenting” rate wars and could spell “disaster” for ocean carriers in 2012, Alphaliner warned.
The new partnerships, aimed at countering Maersk Line’s launch of the Daily Maersk service, will not remove excess capacity on the route, the container analyst said. Meanwhile, new tonnage will continue to flow from shipyards.
“Competition on the Asia-Europe trade will get even more intense next year as carriers are to restructure their networks and reshape their alliance partnerships, with more capacity additions on the horizon.”
The partnership between MSC and CMA CGM in early December was followed within weeks by the creation of the G6 Alliance by the six members of the Grand and New World Alliances and capped this week by an all-Asian agreement between Evergreen and the four carrier CKYH alliance.
“These developments forebode that the unrelenting rate war on the Asia-Europe trade is set to continue and could spell disaster for carriers in 2012,” Alphaliner said in its latest weekly report, published before the Evergreen-CKYH Alliance agreement was unveiled this week.
“If one of Maersk’s intentions in launching the Daily Maersk product in October was to kill off its competitors with its comprehensive coverage of the Far East-North Europe trade, the strategy is clearly not working out as planned.”
Spot pricing has edged up this month on Asia-Europe lanes after reaching historic lows. Carriers, which postponed peak season surcharges in late December because the expected year-end surge in bookings failed to materialize, will have one more chance to raise rates in January prior to the Chinese Lunar New Year, which falls on Jan. 23.
“However, with a weaker outlook for Chinese exports next year, any rate gains will likely be short lived,” according to Alphaliner. “With all gloves off on the Asia-Europe trade in 2012, the rate war is expected to intensify – spelling disaster for all carriers on the trade."
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The Alliances in and of themselves don't affect rate levels, it is the supply demand ratios. One could theorize that without the Alliances a carrier or two might seem fit to drop out but purely theory.
And the thought that Daily Maersk in just a few months would run people out of business couldn't have been in anyones plans.
But the issue of the supply expanding with new builds and the demand softening is the real threat to the carriers. If they don't do anything to about capacity management - and nothing today suggests that they will - then some carriers are indeed in serious trouble. All will take a financial hit, some will survive and some won't.