Despite the slew of rate restoration plans and general rate increases announced by lines for December and January, excess capacity will continue to undermine efforts to boost revenues into 2013, according to leading analysts.
Janet Lewis, head of industrial and transportation research in Asia at Macquarie Capital Securities, said November rate hikes on Asia-North Europe lanes had been partially successful after Maersk, following the lead of the CKYH and G6 alliances, withdrew two loops in its winter schedule from mid-October. However, she said further rate erosion is still likely as carriers are now cutting prices but not capacity in Asia-Mediterranean services.
“Without further capacity cuts, the much lower rates in the Med will pull down the Asia-North Europe rates over the coming weeks, limiting the impact of rate restoration achieved this month,” she said.
Earlier this week, both Hanjin Shipping and Hapag Lloyd announced rate restorations of $600 per TEU in the Asia-Europe trade starting from mid-December. Market leaders Maersk Line, Mediterranean Shipping Co. and CMA CGM have also announced rate increases in December.
“So far, we’ve heard of nine carriers in total pushing for a mid-December GRI on the Asia-Europe and Asia-Med trade lanes,” said Dan Pancheri, an analyst with ACM/GFI Group.
He said his company’s clients are not convinced the rate increases would make any real impact. “By their own admission, the success carriers enjoyed with the November GRI was only short-lived,” he added. “It seems that GRIs are no longer a tool used by carriers to raise revenue, but simply one used to stem their losses.”
One major factor in oversupply is the failure of MSC and Evergreen to remove capacity on Asia-Europe lanes aside from a few “token” skipped sailings, according to Lewis. “With the sector still entirely focused on market share, this move will be perceived as a stealth attempt to gain market share at the expense of other carriers that have cut capacity,” she added. “This situation is most pronounced in the Mediterranean market, where demand is the weakest and has only seen one loop being withdrawn by Maersk.
“Although some carriers have taken steps to restore profitability and started idling vessels, the sector remains oversupplied and freight rates will continue to hover around the breakeven levels in 2013.”
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