MSC leads transpacific capacity exodus while ZIM bucks trend Ship’s crew

From Alex Lennan (The Loadstar) –

Shipping lines have withdrawn nearly a quarter of their capacity from the trans-Pacific trade route over the past year as freight rates have fallen below pre-pandemic levels.

The results of airlines operating on the transpacific are breakeven at best, prompting them to reassess their network coverage and shift tonnage to more lucrative routes such as Asia to the Mediterranean.

An analysis by Alphaliner found that the average weekly slots available from Asia to North America fell to 516,160 TEU, down 23.3% from June 2022.

The adviser said the “exodus” between Asia and North America was led by the world’s largest airline MSC, which reduced its trans-Pacific capacity by 35% year-on-year, while 2M partner Maersk cut back 19%.

However, this huge reduction in capacity by the two largest global airlines is somewhat distorted by the fact that both lines deployed additional tonnage in the form of standalone loops during the peak demand period a year ago when average rates topped $10,000 per 40 foot, and some premium spot prizes have been touted to be in excess of $20,000.

Average spot prices from Asia to the US were around $1,500 per 40ft for US West Coast ports before Corona and $3,000 on the East Coast – but now they’re down to around $1,200 and $2,100 respectively dropped per 40 feet.

And before the pandemic, long-term contract rates were well above spot rates, but this year they show only a small premium over the short-term market.

In addition, the operating costs of the lines have risen significantly due to declining freight income due to expensive charter extensions and inflationary increases on the part of service providers.

Alphaliner also pointed out that all the “newcomers” to the transpacific trade, who were taking advantage of sky-high rates and strong demand to make substantial profits on voyages of even small container ships, were now either exiting the market or discontinuing the service — namely in the subsequent case of China United Lines, later this month.

These line “disruptors” — CU Lines, Sea Lead, Pasha, Transfar, TS Lines, BAL, and Jin Jiang — accounted for 138,800 teu, or 2.5% of the total fleet, according to Alphaliner data as of June 2022. And those numbers don’t include the numerous ad hoc charters on general cargo vessels that desperate shippers have had to commit to to protect their supply chains.

Alphaliner, on the other hand, points out that Zim actually increased the number of slots offered on the route by 21% compared to last year.

“The Israeli carrier has closed all so-called Zim eCommerce Express Asia-USWC loops, but has diverted affected vessels to a new Southeast Asia-Far East-USEC eCommerce Express Baltimore Service (ZXB) that requires 13 vessels,” Alphaliner said.

The adviser added that another reason for Zim’s growth and bucking the transpacific trend is the delivery of a number of long-term chartered 15,000 teu LNG-powered vessels from Seaspan, operating on an upgraded Asia USA East Coastal Loop.

(c) Copyright Thomson Reuters 2023.

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