An effort by container shipping companies to deal with surplus tonnage by cascading 8,000-TEU vessels into the trade lane between Asia and South America's east coast "appears to have seriously backfired," said an article in the latest edition of Drewry's Container Insight Weekly
The London consultant said "recent launching of MSC’s new Ipanema service in the middle of April, and the subsequent announcement of the deployment of much bigger 8,000-TEU vessels by others, will result in a massive 33 percent increase in capacity between April and July." Other changes include "upgrading of vessels
deployed in Evergreen/Coscon/Zim’s ESA schedule (from an average of
6,212 TEUs to 8,500 TEUs), and the rationalization of the three services
offered by Maersk Line, CMA CGM, Hamburg Süd, CSAV, CSCL and Hanjin."
Drewry said that "even before all of the plans have been implemented, they have triggered a rate war, with spot prices from Shanghai to Santos collapsing by 26 percent between April and May, down to $2,810 per 40-foot container, including terminal charges according to Drewry Container Freight Rate Insight.
"Anecdotal evidence indicates that since the middle of April, the decline was even higher, and rates were still dropping in the first week of June, indicating that no one wants to be muscled out of market share peacefully."
In the first quarter, Drewry said cargo volume from Asia to South America's east coast was 343,000 TEUs, up 4.7 percent over the first quarter of 2012 and 132,600 TEUs on the backhaul leg to Asia, up 12 percent in a year compared to the 33 percent growth in capacity in just three months.
"As much as ocean carriers would like to hide surplus 8,000-TEU vessels in the North-South trade lanes, this cannot be achieved in the current poor economic climate without creating overcapacity and rate reductions," Drewry said. - Chris Dupin