Staring into the void
Void sailings have helped carriers prop up ship utilisation in low demand months, but their efficacy in raising rates is less certain.
It was only a few weeks ago on these same pages that we wrote about 2M’s decision to suspend the Asia-North Europe 19,000 teu-deployed AE2/Swan service (Damage limitation). After a very brief hiatus that service is reportedly due to resume operations in early December, returning a significant chunk of capacity back to a growth-starved market and inevitably inviting to questions on the impact this will have on freight rates.
It is a pivotal moment in the Asia-Europe calendar as many of next year’s annual shipper contracts are being negotiated in readiness for the start of the year. A big drop in spot rates now would weaken carriers’ hands and make it far harder to secure any improvement over the previous terms.
Due to the time lag in compiling demand statistics we do not yet know the precise demand picture for either September or October, but the latest feed from Container Trade Statistics show that Asia-North Europe trade was still very much in decline through August. Anecdotal reports indicate that ships have been fuller in recent months, which is to be expected following the suspension of one of the trade’s largest services. However, this hasn’t fed into higher rates, which have been on fairly steep decline the past two months, with the Shanghai to Rotterdam benchmark of Drewry’s World Container Index losing approximately $400 per 40ft container since the end of August.
This lack of spot market traction may have been one of the deciding factors for 2M carriers Maersk Line and MSC to resurrect the AE2/Swan, but it is also possible that the partner carriers reckoned on the market being in a position to absorb the injection of capacity by the time of resumption.
Anticipating the monthly supply needs is an extremely complex task, one made harder by the lumpy nature of volumes. The conundrum for carriers is therefore how best to accommodate the anticipated peak demand on any given route with sufficient capacity and thus avoid costly overcapacity during non-peak periods. While volumes may be patchy through the year the seasonality is at least relatively predictable, which has enabled carriers to tailor blank/void sailing programs when demand is expected to be reduced, particularly in the aftermath of Chinese holidays.